Pakistan Among Top 3 Likely Beneficiaries of US-China Trade War

Nomura Securities strategists believe Malaysia, Japan and Pakistan are expected to be the top 3 beneficiaries of import substitution triggered by US-China trade war escalation. Nomura's analysis is based on detailed study of 7,705 items which will be subject to tariffs and counter tariffs by US and China if the stand-off continues. Nomura developed two indices as part of its research on the subject: NISI (Nomura Import Substitution Index) and NPRI (Nomura Production Relocation Index).

Source: Nomura Securities

The two economic rivals have announced a series of tit-for-tat tariffs on imports in recent months with US set to increase tariffs to 25% on a range of Chinese products in January, unless the two sides reach a trade deal.

Nomura research shows the US list affects 3,477 products imported by US from China valued at $270 billion. Product categories affected are in electrical equipment, appliances and components (29%), machinery and mechanical appliances (22.7%) and furniture and related products (11.9%). China’s tariff list covers 4,228 US products with a combined value of $110 billion, and consists of food, beverage and tobacco, and vehicles.

Malaysia will benefit most, in particular from its exports of “electronic integrated circuits, liquefied natural gas and communication apparatus”. “Vehicles with only spark-ignition internal combustion reciprocating piston engines” will help Japan, according to the analysis, while Pakistan’s cotton yarn exports could rise.

If the trade war between the world's top two economies continues for years, there will also be production relocation of industrial units from China to other countries in the region. The biggest likely beneficiaries of it will be Vietnam, Malaysia, Singapore and India. Pakistan is least likely to benefit from it.

New opportunities are likely to open up for several Asian nations, including Pakistan, to increase industrial production and grow exports if the US-China trade war escalates.

Will the US-China trade conflict escalate? Is Pakistan capable of seizing the opportunity to expand its exports? Will Pakistan's recurring balance of payments crises end?  Will Pakistan manage to avoid repeated IMF bailouts? Only time will tell.

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Comments

Riaz Haq said…
Pakistan's tech exports jumped from $75 million in Sept 2018 to $104 million in Oct 2018, according to data from the State Bank of Pakistan

http://www.sbp.org.pk/ecodata/ExportsImports-Goods.pdf

The export receipts from Pakistan stood at $355 million, during the first four months of the current financial year which started July. These receipts show a year-on-year increase in the IT-related exports standing at 5%. The exports value from the same period last year stood at $337 million. During the last year, the Pakistani IT exports had shown a growth of 13% during the whole financial year.

On a rather good note, the IT-related imports showed a decline as more reliance went towards indigenous produce of ICT-related services and products. The imports have decreased from $163m to $147 showing a decrease of 9.8%. It must be mentioned here that the facts presented in this report account for the trades with receipts and apart from this a lot of informal trade also happens between Pakistan and the rest of the world.
Riaz Haq said…
Pakistan's tech exports jumped from $75 million in Sept 2018 to $104 million in Oct 2018, according to data from the State Bank of Pakistan

http://www.sbp.org.pk/ecodata/ExportsImports-Goods.pdf

Pakistan's information technology exports have bucked the nation's declining exports trend with double digit growth to reach $1,065 million in fiscal year 2018, according to the State Bank of Pakistan. It is generally believed that Pakistan's central bank underestimates technology exports. Some have argued that the actual IT exports were closer to $5 billion in fiscal 2018. Some of the differences can be attributed to the fact that the State Bank IT exports data does not include various non-IT sectors such as financial services, automobiles, and health care.

https://www.riazhaq.com/2018/08/state-bank-pakistan-it-exports-surge-to.html
Riaz Haq said…
#Pakistan’s #digital revolution is happening faster than you think. Growth is being accelerated by other major investments in #power and #connectivity #infrastructure, technology and digital infrastructure. #technology #CPEC https://www.weforum.org/agenda/2018/11/pakistan-s-digital-revolution-is-happening-faster-than-you-think/ via @wef

The digital power of China’s Belt & Road Initiative (BRI) is slowly unfolding and shaping into a whole new area of opportunity.

When the BRI took global centre stage in 2013, most conversations revolved around traditional infrastructure: building roads, railways, power sources and linking borders. However, the digital awakening that BRI brings, and the associated development of human capital and innovation, is much more powerful.

The global map is being altered at a much faster rate than anticipated due to the disruption created by digital infrastructure, artificial intelligence, the Internet of Things, and blockchain. Further digital and technological disruption is now set to mend fractures in society – leading to improved living conditions and enhanced economic empowerment.

This disruption has given new life to e-commerce and the start-up scene in BRI countries. In light of the Global Competitiveness Index 4.0, it is extremely important that economies grow in all areas, overcoming challenges and making investment in human capital and innovation. Resilience and agility are key.

Looking at the South Asian region, some of the traditional deterrents to growth have been inadequate transport facilities, patchy power supplies and lack of financial inclusion. As we have seen in the past, industrial revolutions take their time to reach developing countries but the Fourth Industrial Revolution has been quick to reach all corners of the world.

Billions of dollars of investment are bridging the infrastructure and power supply gap while improving technology – the goal is to look past the problems that have hindered the road to progress in countries along the BRI.

The flagship project of the BRI, the China-Pakistan Economic Corridor (CPEC), which is a major collaboration between China and Pakistan, has been rapidly progressing and the impact of the project can be seen in the lives of Pakistani people, as reflected in an improving human development index.

Pakistan, which is emerging from many years of the war on terror, is now on a decent path to progress, with economic growth of 5.8% and improved investor confidence. At the World Economic Forum in 2017, Ebay’s chief executive, Devin Wenig, highlighted Pakistan as one of the fastest growing e-commerce markets in the world. In 2018, Alibaba bought Pakistan’s largest e-commerce platform, Daraz.pk.

..... Ant Financial Services, China’s biggest online payment service provider, recently bought a 45% stake in Telenor Microfinance Bank, in a deal that valued the Pakistani bank at $410 million.

Irfan Wahab, chief executive of Telenor Pakistan, called the deal a “game changer”; while Eric Jing, chief executive of Ant Financial, said it would provide “inclusive financial services in a transparent, safe, low-cost and efficient way to a largely unbanked and underbanked population in Pakistan”.

This kind of investment will benefit from the significant demographic dividend in Pakistan, targeting the largely unbanked young population, and providing not only financial inclusion but also a base on which to build digital businesses.

What the country needs now is to improve its position on the innovation and financial inclusion indices, currently at 89 and 75 respectively, on the World Economic Forum’s Competitiveness Index 2018.

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The rapid completion of CPEC projects and the use of digital technology in the process is disrupting the economy and the lives of people at the same time. The question is whether Pakistan’s leadership will choose to embrace these technologies and take advantage of the biggest project on the road to progress. The future is full of opportunities and promise.

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