Ramzan; Pakistan Economic Survey; Indian IT Job Losses; Trump's Foreign Tour

What is Ramadan all about? Is it only about abstaining from food and drink in the daylight hours? What is the key message for this Ramzan? Isn't respecting Huqooq-ul-Ibad (human rights of others) as important as observing Huqooq-ul-Allah (Duties to Allah such as prayer and fasting) for each Muslim? What must Muslims do this Ramzan to fulfill all of their obligations to Allah and His creation?

What does the Economic Survey of Pakistan say about Pakistan's GDP, per capita income, infrastructure development, education and other important indicators? What must Pakistani leaders do to ensure greater focus on and investment in education and not just in infrastructure? What is the size of and the key priorities in Pakistan's budget for 2017-18? Should some of the $20 billion (out of the $50 billion budget) for infrastructure be allocated to education to boost Pakistan's stagnant literacy and school enrollment rates?

Why is India losing IT jobs at a rate of 200,000 jobs a year, according to McKinsey? Is it all because of Trump's H1B visa tightening? Or does it have more to do with the need for new skills to deal with new technologies such as cloud computing and digital services?

What was the objective of Trump's tour of the Middle East and Europe? Has he achieved any of the objectives? Was Nawaz Sharif's low-key presence at the Riyadh summit appropriate? Are Nawaz Sharif's critics right? Should he have had a more prominent role at the US-Arab-Islamic summit? How would that impact Iran-Pakistan ties?

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


Related Links:

Haq's Musings

Riaz Haq's Ramadan Sermon

Pakistan's Lagging Literacy and School Enrollment Rates

Impact of Trump's H1B Visa Crackdown

Impact of Trump's Appointments on US Policy

Iran-Saudi Conflict

Talk4Pak Youtube Channel


Riaz Haq said…
Pakistan Budget 2017-2018: Debunking The Myths


The government of Prime Minister Nawaz Sharif is likely increasing the country’s defense spending by 7% due to the growing need to safeguard China-Pakistan Economic Corridor (CPEC) projects and be better prepared to fend off any potential military threat from India. However, critics accuse the government of sugarcoating the budget ahead of the national elections.

For fiscal 2017/18, Pakistan is setting its military budget at $9 billion, compared to $8.4 last year. By contrast, Pakistan’s biggest enemy India unveiled its own new budget in February with defense spending standing at more than $50 billion, according to the Institute for Defense Studies and Analyses.

As much as $20 billion of the budget’s $50 billion will go toward development, $1.8 billion of which is set to finance CPEC projects. An op-ed published by DAWN suggests that there is a “Chinese footprint” on the Pakistani budget. As such, one can argue that the Chinese would allocate more money to CPEC projects if they were so keen on pushing forward the projects that matter to their national interests and not caring about Pakistan and its economic well-being whatsoever.


One of the most prominent examples is Geo’s mud slinging for not increasing Pakistan’s health expenditures fourfold even though this year the government has increased health expenditures by nearly two times, from Rs. 29 billion to Rs. 49 billion.

For a country that is only beginning to soak up all the benefits from incoming foreign investments and is only beginning to enter the world as an emerging market, increasing expenditures by two times in any of the sectors already deserves praise. And in the case of CPEC, a whopping $150 billion in foreign investments is expected to flow into Pakistan in the coming years, according to last year’s summit of top government leaders and investors


Umar Saif ‏Verified account @umarsaif May 29

Pakistan's education budget of Rs790 Billion compared to Rs 860 Billion Defence.Includes Federal&Provincial budgets both current&development

Riaz Haq said…
BBC News - A long term view: The man who took a chance on #Pakistan turned $1m #investment into $100m in 5 years. http://www.bbc.com/news/business-40081530


On 2 May 2011, the Barack Obama announced that Al Qaeda leader Osama Bin Laden had been killed by US forces in Pakistan.
He was shot dead at a compound near Islamabad, the Pakistani capital. And once again, Pakistan was in the headlines for all the wrong reasons.
A country used to bad news - both politically and economically - it has long been seen as the basket-case economy of South Asia because of its slumping foreign reserves, weak currency and lack of foreign direct investment.
It was probably one of the last places on earth that a foreign investor would think to put their money.
But not Mattias Martinsson. Six months later, in October 2011, he launched Pakistan's first ever foreign equity fund.
In the beginning he couldn't get anyone to back the fund, so he invested $1m (£780,000) of his own cash and that of his partners. Today, that fund is worth $100m.

"It was a tough sell at the time," chuckles the soft-spoken Swede on the phone from Stockholm.
That's an understatement. At one point - soon after the bin Laden killing - things got so bad that furious Pakistani investors stoned the exchange because of the falling share prices.
"Then the US military bombed a Pakistani military base, and Pakistan initiated a blockade of the routes for Nato supplies. The market went down 10%," Mr Martinsson says.
But he stayed in the stock market, and in 2012, things started to turn around with a tax amnesty the government launched encourage the Pakistani diaspora to repatriate money.
"The market went up and we raised $50m in three months," he recalls.
It also marked the first time in decades that more money was coming into Pakistan then going out.
Almost a decade later, Mr Martinsson feels vindicated.
That's because on 1 June 2017, Pakistan enters the MSCI Emerging Markets Index - a sign that things are turning around for the once-struggling economy. And investors are already starting to pour in.
The MSCI Emerging Markets Index is made up of 23 high-growth economies including India, China and Brazil.
Pakistan's main index, the KSE 100 has consistently outperformed the MSCI Emerging Markets Index
If you had invested $100 into the KSE in January last year, it would now be worth $164. If you had put it into the MSCI, it would only be worth $137. That's a success that helped make the case for it to be included.

Being in the Emerging Markets Index is a reputational reassurance to investors about the growth prospects and transparency of companies in that country.
Pakistan used to be a part of the index, but was downgraded to frontier market because of the exchange's decision to shut down for four months in late 2008 after prices dropped dramatically. That meant foreign investors couldn't get their money out.
"We were kicked out in 2008 after the financial crisis because of measures Pakistan took at the time to stop foreign funds from fleeing the country. Obviously foreign investors got a rude shock," says Nadeem Naqvi, the Karachi Stock Exchange's managing director.
"We did a lot of lobbying and reforms to get re-included again into this index," he tells me from Karachi. And he assures me and investors, that the KSE will be a liquid market.
"Parliament passed the Pakistan Stock Exchanges Act in 2012, which has improved corporate governance and reforms to prevent a reoccurrence of what happened in 2008," he says.

China impact
Pakistan's gross domestic product (GDP) has also soared over the last few years, a lot of that is thanks to the growth in the middle classes, in part fuelled by the Chinese investment boom that is part of Beijing's One Belt One Road initiative.
Riaz Haq said…
#Pakistan ETF (NYSE: PAK) In Focus As Country Regains #MSCI #EM Status


The re-entry into the emerging market block after nine years was made possible by the country’s improving liquidity and growth. Pakistan lost this position in late 2008, following a period of market turmoil that halted trading for months in the Karachi exchange.

Pakistan is the first country to get the frontier-to-emerging promotion after Qatar and the United Arab Emirates several years ago. MSCI will add Pakistan to the Emerging Market Index effective May 31, at the market close, with a weight of just 0.2% (read: Can Emerging Market ETFs Retain Their Mojo in 2017?).

The reclassification is making investors bullish about Global X MSCI Pakistan ETF (PAK – Free Report) – the ETF targeting Pakistani equity markets. The fund will likely lure a wider class of investors thereby injecting huge amounts of money into the country. In fact, the fund is on track for the biggest monthly inflow since its inception two years ago. The ETF has gathered $11.8 million in capital so far this month, propelling its asset base to $48.5 million. According to Bloomberg, the bearish bets have also fallen to the lowest level since December. Over $1 million short positions have been cut over the past six weeks.

PAK in Focus

The product offers exposure to 43 Pakistani equities by tracking the MSCI All Pakistan Select 25/50 Index. The top two firms – Habib Bank and Lucky Cement – dominate the fund returns with a double-digit exposure each. Other firms hold less than 7.2% of the assets. From a sector look, financials and materials occupy the top two positions at 33% and 28%, respectively, followed by energy (18%).

The ETF is expensive relative to many emerging market funds, charging 91 bps in fees and expenses. Additionally, it trades in small volumes of about 35,000 shares resulting in additional cost in the form of wide bid/ask spread.

PAK has been outperforming the broad emerging funds, returning investors 33.5% over the past one-year period compared with gains of 29% for (EEM – Free Report) . It has a Zacks ETF Rank of 3 or ‘Hold rating with a Medium risk outlook, suggesting more room for upside (read: Pakistan ETF Hits New 52-Week High).

The outperformance is likely to continue given the country’s GDP growth, falling poverty, and bourgeoning middle class. After falling to below 4% growth in 2008, Pakistan GDP growth hit a 10-year high of 5.28% for fiscal year 2016–17. However, terrorist attacks, bombings, other incidents of violence and brutal state retaliation continue to weigh on the country’s growth and the ETF performance.

The Global X MSCI Pakistan ETF (NYSE:PAK) was unchanged in premarket trading Tuesday. Year-to-date, PAK has gained 7.49%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.

PAK currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #39 of 77 ETFs in the Emerging Markets Equities ETFs category.
Riaz Haq said…
#India's slowing #GDP growth blamed on 'big mistake' of #demonetization. #Modi #BJP


Prime minister Narendra Modi’s policy of stopping issue of higher value banknotes has weakened economy, say experts

India has posted its slowest growth rate in two years, ceding its status as the world’s fastest-growing major economy to China, with economists blaming the downturn partly on last year’s shock decision to recall the country’s two highest-value bank notes.
Analysts said the 6.1% GDP growth figure for the January to March quarter – compared with China’s 6.9% – reflected a general economic slowdown in the south Asian giant, compounded by the shock demonetisation of 500 and 1,000 rupee banknotes, worth approximately £6 and £12.

The move led to months of acute cash shortages across India that hit the country’s manufacturing and construction sectors particularly hard, the former recording slower growth than in the same period last year. The construction sector contracted by 3.7%.

The cash recall was intended to hasten the country’s transition towards a formal economy and close down the booming economy of untaxed cash transactions, which aid corruption, the funding of terrorist groups and keeps counterfeit notes in circulation. It was also expected to unearth stashes of untaxed wealth in a country where just 1% pay income tax.

India’s Reserve Bank is yet to say how much “black money” was deposited in banks but early indications suggest it was less than expected.

Gurchuran Das, an economic commentator, said the lagging growth was well below the rate India required to create enough jobs to match the number of new entrants to the workforce, estimated to be roughly 1 million people a month.

“It shows that demonetisation was a big mistake,” he said. “What this has done is put us back about six months. We should have been inching towards 8% annual growth, but have ended up around 7.1%.

“We’ve really got to be at 9% growth to create the jobs we need,” he said. “Already we were having problems creating those jobs, but demonetisation has exacerbated it by a couple of quarters.”

He said the economy had bounced back after cash shortages eased in January and the country was likely reach 8% growth in the next three to four years, a prediction shared by the global ratings agency Moody’s.

India's banknote ban: how Modi botched the policy yet kept his political capital
Read more
Arvind Subramanian, India’s chief economist, said the reduction in growth was “quite expected” after demonetisation, and that the replenishment of cash stocks and the monsoon period would help the economy rebound.

Growth in India has been slowing since the middle of 2016, according to HSBC, but Das said the country’s economy was generally wellmanaged. “The inflation rate is the lowest it’s been in five years, the fiscal deficit has come down, and India has in fact become the largest destination for foreign investment in the world,” the former CEO of Procter & Gamble India said.

He added that the key to creating high-productivity jobs in the formal sector was expanding India’s share of global exports, currently around 1.7%.

India is preparing to introduce a national goods and services tax in July that is expected to make the country a more attractive destination for foreign investment, cut red tape for business and increase trade between states. But Moody’s has warned the country needs to further reduce debt levels if it hopes to boost its international credit rating, currently just above junk status.

Although the implementation of demonetisation was seen as botched by some, the policy is thought to have been a political coup for the Indian prime minister, Narendra Modi. In March, he decisively won an election in India’s largest state that was seen as a referendum on the scheme.
Riaz Haq said…
Punjab unveils Rs1.977 trillion Budget 2017-18


LAHORE – Punjab Finance Minister Dr Ayesha Ghous Pasha on Friday presented fifth provincial budget Pakistan Muslim League-Nawaz (PML-N) for upcoming fiscal year 2017-18 with total outlay of Rs1.977 billion.

The budget session was presided over by Punjab Assembly Speaker Rana Muhammad Iqbal Khan, and also attended by Chief Minister Mian Muhammad Shehbaz Sharif.

The provincial minister said that the budget for the next fiscal year has the largest development programme amounting to Rs635 billion. She added that it was unprecedented in the country’s history among all provinces.

“The development budget is 15 per cent more than the current fiscal year,” Dr Ayesha said in her budget speech.

Earlier, the provincial cabinet approved the budget in a meeting presided over by CM Shehbaz Sharif.

The government has allocated 20 billion for agriculture in the province.
Development Programs

Rs635 billion allocated for annual development program.
Rs 95 billion for roads.
Rs57 billion have been allocated for Water and sanitation.

A total of 341 billion have been allocated for education in Punjab.
Rs57 billion have been fixed for health sector.
Rs 20 billion have been fixed for DHQs, THQs.
Primary healthcare will get a Rs1 billion boost in the next fiscal year.
An amount of Rs 20.4126 billion has been allocated in the fiscal year 2017-18 for the provision of free medicines.
Salaries & Pension

A 10 per cent raise has been made in the salaries and pension of provincial government employees.


Rs52.35 billion will be allocated for school education.
A sum of Rs230 billion has been set aside for District Education Authorities.
Rs28 billion have been fixed for providing basic facilities at government schools.
Rs6.03 billion have been set aside for construction of new classrooms in Punjab schools.

A sum of Rs7.567 billion has been allocated for industries in the proposed budget.

TEVTA will receive about Rs5.054 billion as grant-in-aid, and an amount of Rs145.575 million has been reserved for Headquarters Establishment.
An amount of Rs179.354 million has been reserved for Inspectorate of Mines, whereas the Punjab Small Industries Corporation will get Rs1.420 billion as grant-in-aid.
Punjab Skills Development Project will receive Rs43.354 million. Sasti Roti Authority will receive Rs8.799 million and Rs180.397 million will be spent on the regional establishment.
Riaz Haq said…
#India #manufacturing growth slows to three-month low in May. #MakeInIndia #Modi https://www.vccircle.com/india-manufacturing-growth-slows-to-three-month-low-in-may/ … via @vccircle

Indian factory growth cooled in May as new orders expanded at a more modest pace, but manufacturers were able to raise prices slightly, according to a private survey.
The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, fell to 51.6 in May from April’s 52.5, marking its fifth month above the 50 level that separates growth from contraction.
Output expanded at the softest pace since February but remained moderate.
The new orders sub-index, which reflects both domestic and foreign demand, fell to 52.6 from 53.8 in April. Export orders contracted for the first time in four months, albeit marignally.

“The upturn in the Indian manufacturing sector took a step back in May, with softer demand causing slower expansions in output and the amount of new work received by firms,” said Pollyanna de Lima, economist at IHS Markit.
“Moreover, there was a renewed decline in new export orders.”
While companies were able to raise selling prices, the increase was modest, reinforcing views that inflation may remain below the Reserve Bank of India’s medium-term target of 4 percent, giving it room to ease monetary policy.
Indian inflation eased in April to 2.99 percent from 3.89 percent in March.
Also helping the inflation outlook, monsoon rains have arrived earlier than anticipated, with the meteorological department predicting normal downpours this year.
“With inflation under control and manufacturing growth below par, we may see the RBI changing neutral monetary policy stance to accommodative in coming months in order to support the economy,” de Lima said.
While the central bank is expected to leave rates unchanged at 6.25 percent in its June meeting, the Monetary Policy Committee will adopt a less hawkish tone in its statement, according to a Reuters poll of 60 economists.
Analysts think that a policy hold is still on the cards, despite a shock slowdown in economic growth reported on Wednesday.
The economy expanded 6.1 percent in the January-March period, far slower than expectations for 7.1 percent, with capital investment showing no sign of reviving.
However, consumer spending is likely to pick up before the government implements a multi-rate Goods and Services Tax from July 1, with some items expected to be taxed at 28 percent or higher.
Riaz Haq said…
From Spectator Index:

Govt debt as share of GDP

Japan: 250%
India: 70%
Pakistan: 66%
Vietnam: 62%
China: 46%
Thailand: 41%
Iran: 35%
Indonesia: 28%
Saudi: 13%

Riaz Haq said…
#Indian #Technology Workers Worry About a Job Threat: Technology. #H1B #ModiInUS


PUNE, India — Last month, Sudhakar Choudhari took the company bus as usual from his one-bedroom apartment to the suburban offices of Tech Mahindra, a major employer of workers in India that powers the global technology machine behind the scenes. Then a manager took him into a conference room and asked him to resign.

“It was a terrible scene for me,” said Mr. Choudhari, 41, who had been with the company for 11 years and most recently maintained software for a British client. As the manager spoke, he thought: “I have an 11-year-old child. My wife is not working. How to pay the home loans?”

Mr. Choudhari is one of a number of Indian technology workers who have lost their jobs in recent months as many in India debate whether an industry that has long served as a gateway to the middle class is preparing to shed jobs en masse.

India’s information technology industry grew at a breakneck speed over the past two decades thanks to the trend commonly called offshoring. The industry and related businesses generate more than $150 billion in annual revenue and employ about four million people to build and test software, to enter and analyze data, and to provide customer support for American and European companies looking for relatively inexpensive labor.

But the global tech industry is increasingly relying on automation, robotics, big data analytics, machine learning and consulting — technologies that threaten to bypass and even replace Indian workers. For example, automated processes may soon replace the kind of work Mr. Choudhari was performing for foreign clients, which involved maintaining software by occasionally plugging in simple code and analyzing data.

“What we’re seeing is an acceleration in shedding for jobs in India and an adding of jobs onshore,” said Sandra Notardonato, an analyst and research vice president for Gartner, a research and advisory company. “Even if these companies don’t have huge net losses, there’s a person who will suffer, and that’s a person with a limited skill set in India.”

Such job losses could be politically damaging to the government of Prime Minister Narendra Modi, who won an electoral mandate in 2014 on the promise of development and employment for a bulging youth population. In January, near the three-year mark of his administration, an economic survey reported that job creation had stalled.

So far, the scale of the impact is not clear. T. V. Mohandas Pai, a longtime industry figure, estimates the cuts will encompass up to 2 percent of the work force by September, mainly from culling underperformers. A 2015 study released by the National Association of Software and Services Companies, the Indian technology industry trade group known as Nasscom, and McKinsey India found that 50 to 70 percent of workers’ skills would be irrelevant by 2020.

Of course, new technologies will create new jobs. The impact of automation and artificial intelligence still is not clear, and they could open up new areas that simply shift tech work rather than eliminate it.

But some in the Indian tech industry worry that many of the new jobs will be created outside India, in places like the United States, in part because President Trump has pledged to tighten visa laws that allowed many Indian nationals to go to that country to work. The subject is likely to pop up on Monday, when Mr. Modi is scheduled to visit the White House.

The Indian government has rushed to reassure the public that job losses will be minimal. Ravi Shankar Prasad, the Indian minister who oversees the technology industry, recently denied that major layoffs were occurring even as he encouraged the industry to speed up development.
Riaz Haq said…
#Pakistan rupee rebounds to Rs 105.8 to US$ after shock plunge to 108


Pakistani rupee rebounds after shock plunge fastFT Read next fastFT Dollar takes a dip on US payrolls report 2 HOURS AGO Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save 2 HOURS AGO by: Mehreen Khan Pakistani’s rupee has recovered some poise after a shock plunge against the dollar that has escalated tensions between the government and central bank. The rupee nosedived more than 3 per cent on Tuesday to its lowest since at least 1989 – marking its first significant move in over two years. The central bank had been keeping the currency stable against the dollar for over three years with the surprise plunge immediately raising questions about the State Bank of Pakistan allowing the depreciation to help support the economy. Having weakened from Rs104.8 against the dollar to Rs108, the rupee is now trading around Rs105.8 but has still not managed to wipe out the week’s losses. Pakistan’s finance minister has since hit out at the central bank, accusing it of “exploiting” the country’s political troubles where prime minister Nawaz Sharif has been implicated in a corruption scandal over the Panama Papers. Ishaq Dar, finance minister, called the move in the currency “artificial”, and said he had “deep concern and indignation” at the central bank’s tactics. He has ordered a government investigation into the FX move. Pakistan has suffered from a drop in exports in recent years, as well as declining remittances from Pakistanis living overseas. Economists note that a weaker currency should help reverse both trends while also allowing the central bank to preserve its dwindling foreign currency reserves. The benchmark Karachi 100 stock exchange is up 1 per cent today after suffering a 4 per cent plunge on Tuesday.

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