Bangladesh: Development Over Democracy

Until 2010, Bangladesh was a laggard in South Asia region. Its per capita income was about half of Pakistan's. Now Bangladesh's per capita gdp is higher than both India's and Pakistan's. What changed? The biggest change is Bangladeshi leader Shaikh Hasina's decision to stifle the unruly Opposition and the media to bring political and economic stability to the South Asian nation of 160 million people. It has eliminated a constant sense of crisis and assured investors and businesses of continuity of government policies. With development taking precedence over democracy, Shaikh Hasina followed the example of Asian Tigers  by focusing on export-led economic growth of her country. She incentivized the export-oriented garment industry and invested in human development. Bangladesh now outperforms India and Pakistan in a whole range of socioeconomic indicators: exports, economic growth, infant mortality rate, primary school enrollment, fertility rate and life expectancy.       

South Asian Countries' Export Growth. Source: Wall Street Journal


Bangladesh's Exports:

Bangladesh's garment exports have helped its economy outshine India's and Pakistan's in the last decade. Impressed by Bangladesh's progress, the United Nations’ Committee for Development Policy has recommended that the country be upgraded from least developed category that it has held the last 50 years. 

Per Capita Income Growth in Pakistan 2002-2019. Source: World Bank


The next challenge for Bangladesh is to move toward higher-value add manufacturing and exports, as Vietnam has done. Its export industry is still overwhelmingly focused on garment manufacturing. The country’s economic complexity, ranked by Harvard University’s Growth Lab, is 108 out of the 133 countries measured. That is actually lower than it was in 1995, according to the Wall Street Journal

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


Vietnam's Rise:

Vietnam ruled by autocrats is rapidly becoming an Asian Tiger. With rising manufacturing costs in China and the US-China trade war,  many major manufacturers are relocating to other countries in Asia. This situation has helped Vietnam emerge as a hub of foreign direct investment (FDI). FDI flow into the country has averaged more than 6% of GDP, the highest of any emerging economy. The country’s recent economic data shows a rise of 18% in exports, with a 26% jump in computers/components exports and a 63% jump in machinery/accessories exports.  These figures have earned Vietnam the moniker of the newest "Asian Tiger".

Musharraf Years & History of Pakistan's GDP Growth Rates. Source: PBS 



Pakistan's Lost Decade:

It was in 2007 that Pakistan caught the "democracy" fever led by the lawless lawyers of Lahore. This led to the return of corrupt dynastic rule of Asif Zardari and then Nawaz Sharif. The year 2007 also marked the beginning of yet another lost decade that saw Pakistan's per capita gdp's continuing lag behind South Asia region and other emerging economies. 

Pakistan's per capita income started to lag behind other emerging nations in 2007



Pakistan's Potential: 

Pakistan was the original "Asian Tiger" back in the 1960s when  other developing Asian economies sought to emulate its development model. It became an export powerhouse in the 1960s when the country's manufactured exports exceeded those of Thailand, Malaysia and Indonesia combined.  The creation of major industrial estates in Karachi under President Ayub Khan's industrial policy incentivized industrial production and exports of value added manufactured products such as textiles. Now the country's industrial output lags its neighbors'. 

History of Pakistan's Manufactured Exports


With Chinese looking to relocate some of their industrial production to low-cost countries, Pakistan has a golden opportunity to grow its industrial output and exports again. Here's Karen Chen explaining why:

“Vietnam is too crowded already and moved into automobiles and electronics. There is no space for investment in Vietnam. Myanmar doesn’t have infrastructure. India is terrible. In Bangladesh you don’t have right conditions for setting up fabric units. So Pakistan is the ideal location for such garment manufacturing because of abundance of cheaper labour. The investment and tax policies for SEZs and new projects are also good. We’ve confidence to be at here.”

Seizing the opportunity to attract export-oriented investors will help Pakistan become the next Asian Asian Tiger economy. It will help the country avoid recurring balance-of-payments crises that have forced the nation to seek IMF bailouts with all their tough conditions. Focusing on "Plug and Play" Special Economic Zones (SEZs) is going to be essential to achieve this objective.

A video of retired General Amjad Shoaib responding to the question: "Is Pakistani military establishment to blame for all of Pakistan's problems?" He answers: "Yes, the Pakistani military produced Zulfikar Ali Bhutto and Nawaz Sharif....Zardari also rose from the NRO (pardon) granted by the Pakistani military". But then he asks: "Who forced the people to vote for them? Shouldn't the people share the blame for the ascent of these politician?" 

https://youtu.be/6GWid1ypa-k

    

Comments

Anil said…
So that's where Modi is getting his inspiration from...
Mayraj F. said…
Garment industry was started in 1980. The workers are low paid. Do not even get enough wages to last a month!

" it is little surprise that workers at the Bangladesh factory where the T-shirts were made were paid less than the local living wage.

..
The legal minimum wage for garment workers in the country is 8,000 taka (£73.85) a month, slightly less than the amount received by workers spoken to by the Guardian.

The amount was increased by 2,700Tk a month in December, but campaigners say workers need 16,000Tk to live a comfortable life in Bangladesh. With such low wages, employees often feel compelled to take on large amounts of overtime to make ends meet."
https://www.theguardian.com/business/2019/jan/21/low-wages-garment-workers-bangladesh-analysis#:~:text=The%20legal%20minimum%20wage%20for,a%20comfortable%20life%20in%20Bangladesh
Why are wages so low for garment workers in Bangladesh?
Country offers cheap labour and manufacturing expertise – with often limited oversight

Wages not enough to save:
"Bangladesh's garment industry is the second-largest in the world, behind China's. It accounts for about 84% of Bangladesh's export revenue and is so critical to the economy that sewing machine operators like Akter were declared essential workers, exempt from a lockdown. But many factory owners decided to shut down production anyway, amid declining global orders and fears of infection.
..
"My factory was shut for six weeks. I fell behind on rent. I couldn't pay my brother's medical bills," Akter, 30, told NPR by phone from Dhaka. "I'm very scared and vulnerable. It's not only me. All my coworkers are in the same position."
https://www.npr.org/2020/06/05/869486297/for-bangladeshs-struggling-garment-workers-hunger-is-a-bigger-worry-than-pandemic
For Bangladesh's Struggling Garment Workers, Hunger Is A Bigger Worry Than Pandemic

Bangladesh has LDC status. I think garment industry cannot carry Bangladesh. It['s been like this for almost 40 years. When it starts doing as well as Vietnam in PISA and TIMSS we can say Bangladesh is en route to prosperity and can become like an Asian Tiger.

The garment industry in Bangladesh became the main export sector and a major source of foreign exchange starting in 1980, and exported about US$5 billion in 2002.[38] In 1980 an export processing zone was officially established in at the port of Chittagong.
..
By 1981, 300 textile companies, many small ones had been denationalized often returned to their original owners.[17] In 1982, shortly after coming to power following a bloodless coup, President Hussain Muhammad Ershad introduced the New Industrial Policy (NPI), most significant move in the privatization process,[20] which denationalized much of the textile industry, created export processing zones (EPZs) and encouraged direct foreign investment. Under the New Industrial Policy (NPI) 33 jute mills and 27 textile mills were returned to their original owners.[39]

In 1985 the US and Canada actually imposed import quotas of their own, with no international agreement, on Bangladeshi textiles. However, Bangladesh was able to meet demand for every quota each year and was able to successfully negotiate for higher quotas for subsequent years.[40][page needed]

The export of ready-made garments (RMG) increased from US$3.5 million in 1981 to $10.7 billion in 2007. Apparel exports grew, but initially, the ready-made garments RMG industry was not adequately supported by the growth up and down the domestic supply chain (e.g., spinning, weaving, knitting, fabric processing, and the accessories industries).[citation needed]
Riaz Haq said…
Anil: "So that's where Modi is getting his inspiration from..."

Modi’s divisive hateful Hindutva ideology is a recipe for India’s disaster, not development.

http://www.riazhaq.com/2021/01/india-republic-day-modis-hindutva.html
Ghulam M. said…
China is also an example of economic growth with Authoritarian style govt.
Nazneen A. said…
The UN declared Bangladesh in Feb as one of the least developed countries in the world while Pakistan, India & Sri Lanka are lower middle income countries. Only 4 other countries in Asia are on the LDC list like BD. The rest are in Africa. So this is PM Hasina’s “Singapore” rant!
Riaz Haq said…
Nazneen: "The UN declared Bangladesh in Feb as one of the least developed countries in the world while Pakistan, India & Sri Lanka are lower middle income countries. Only 4 other countries in Asia are on the LDC list like BD. The rest are in Africa. So this is PM Hasina’s “Singapore” rant!"

Bangladesh’s designation as “LDC” is helping its exports get preferential access to western markets. It’s been a competitive advantage for its economy


http://www.riazhaq.com/2017/09/how-has-bangladesh-left-pakistan-behind.html
Waqar A. said…
Everybody knows that exports of Pakistan are stagnant.
But most of Pakistanis will be surprised that Modi Govt is also using consumption led growth model But West is spoon feeding India with huge FDI to balance her books
Riaz Haq said…
Waqar: "West is spoon feeding India with huge FDI to balance her books"

Geopolitics also drive FDI. India has greatly benefited since the end of Cold War, Russia’s fall and China’s rise. Hopefully, Pakistan will benefit from CPEC/BRI

http://www.riazhaq.com/2015/04/can-indian-economy-survive-without.html
Haseeb R. said…
is it okay to conclude that opposition and media not good for economy?
Riaz Haq said…
Haseeb: "is it okay to conclude that opposition and media not good for economy?"


Any opposition that routinely takes to the streets and disrupts life is bad for the country. Such Opposition and the media that create a sense of permanent crisis scare away investors in the economy and buyers of exports. They hurt the entire country.
Haseeb R. said…
in that case Imran Khan should tighten the Pakistani media. It is full of nonsense and even foreign propaganda
Riaz Haq said…
Haseeb R: "in that case Imran Khan should tighten the Pakistani media. It is full of nonsense and even foreign propaganda"

Shaikh Hasina cracked down on the Opposition and the media during 2008 elections. Her party now has 300 seats in 350 member parliament. The media is now tamed. There are very few if any hartals and street protests. This situation has helped Bangladesh economy and exports to grow rapidly. And helped improve a wide range of socioeconomic indicators like infant mortality rate, primary school enrollment, fertility rate and life expectancy.
Riaz Haq said…
After 13 quarters of gdp decline, #Modi is putting lipstick on a pig but the fact is India is now behind even #Bangladesh . Meanwhile, #India’s #Hindutva leaders are more concerned about who Indians marry rather than why they are not working. #Islamophobia
https://www.nationalheraldindia.com/opinion/pm-modi-can-put-lipstick-on-a-pig-but-the-fact-is-india-now-behind-even-bangladesh

by Aakar Patel


The problem did not begin with Covid; it existed much before that. Growth began declining from January 2018 and has declined sequentially, meaning every quarter since then. The government has tried to tweak some of the numbers, something that Americans refer to as “putting lipstick on a pig” but to no avail. It is sequential decline over three years. The India growth story is over and has been over for a few years now. You can make all the speeches you want but you cannot argue against 39 straight months of slowing.

Speaking loudly of competing with China and America but then falling behind even Bangladesh’s per capita GDP does not inspire confidence. The fact is that even without the lockdown we were in crisis, a word that is used loosely but can be said to be accurate here. The government has no idea why the economy began to stall from January 2018. There are theories from the outside, but they are not discussed or debated in government — who will tell the King that his rule is incompetent? Nobody, unless they want to lose their head (or at least their job) and so we continue to bumble on, along the same path that has brought us to this disaster.

The signs of our decay are all around us. Work that has left China because of Trump’s trade war and Covid has not come to India but to Vietnam and Bangladesh. Our neighbour has crept ahead of us in per capita GDP because its exports (powered by high-labour intensive garment manufacturing) are growing while ours have not grown since 2014. We have six years of zero growth in exports. It is also ahead because it has much higher participation of women in the labour force.

In India, the patriarchy is more concerned about who Indians marry rather than why they are not working. India is the most dangerous place for women in the world. According to the Thomson Reuters Foundation World’s Most Dangerous Countries for Women, we were at fourth place in 2011 and then fell to last place in 2018, where presumably we remain. The low participation of women in the workforce has many complex reasons, but the failure of the State and indeed the inability of this current government to stop the slide further, is also responsible.

We have more of the same to look forward to in 2021. We will not see the economy pick up but we will see more bombast from the government about how well we are doing. The enormous hole in the economy that was created in the first quarter of last year (April-June) because of the lockdown will have been filled over the last few months. When results for the same quarter year on year appear sometime in the middle of 2021, Modi will exclaim that we are the world’s fastest growing economy and pretend that the 25% increase is not just the filing up of a hole he himself created but some miracle he has delivered to the Indian economy.


The Economist reported that Mukesh Ambani’s wealth rose 350% in 2020 and Gautam Adani’s rose over 700%, but we are at record unemployment, which is hovering around the 9% mark. And it is not higher still only because many crore Indians have removed themselves from the job market. Those who are not employed and not actively looking for work are not considered unemployed. The real figure could be approaching 15% and perhaps even higher than that.

On every conceivable metric that you can think of, from bank credit growth, to automobile sale, the revelation is not only that there is no India growth story but there is a decline that has set us back years, perhaps a decade. And yet the triumphalism carries on.
Riaz Haq said…
After 13 quarters of gdp decline, #Modi is putting lipstick on a pig but the fact is India is now behind even #Bangladesh . Meanwhile, #India’s #Hindutva leaders are more concerned about who Indians marry rather than why they are not working. #Islamophobia
https://www.nationalheraldindia.com/opinion/pm-modi-can-put-lipstick-on-a-pig-but-the-fact-is-india-now-behind-even-bangladesh

by Aakar Patel


The problem did not begin with Covid; it existed much before that. Growth began declining from January 2018 and has declined sequentially, meaning every quarter since then. The government has tried to tweak some of the numbers, something that Americans refer to as “putting lipstick on a pig” but to no avail. It is sequential decline over three years. The India growth story is over and has been over for a few years now. You can make all the speeches you want but you cannot argue against 39 straight months of slowing.

Speaking loudly of competing with China and America but then falling behind even Bangladesh’s per capita GDP does not inspire confidence. The fact is that even without the lockdown we were in crisis, a word that is used loosely but can be said to be accurate here. The government has no idea why the economy began to stall from January 2018. There are theories from the outside, but they are not discussed or debated in government — who will tell the King that his rule is incompetent? Nobody, unless they want to lose their head (or at least their job) and so we continue to bumble on, along the same path that has brought us to this disaster.

The signs of our decay are all around us. Work that has left China because of Trump’s trade war and Covid has not come to India but to Vietnam and Bangladesh. Our neighbour has crept ahead of us in per capita GDP because its exports (powered by high-labour intensive garment manufacturing) are growing while ours have not grown since 2014. We have six years of zero growth in exports. It is also ahead because it has much higher participation of women in the labour force.

In India, the patriarchy is more concerned about who Indians marry rather than why they are not working. India is the most dangerous place for women in the world. According to the Thomson Reuters Foundation World’s Most Dangerous Countries for Women, we were at fourth place in 2011 and then fell to last place in 2018, where presumably we remain. The low participation of women in the workforce has many complex reasons, but the failure of the State and indeed the inability of this current government to stop the slide further, is also responsible.

We have more of the same to look forward to in 2021. We will not see the economy pick up but we will see more bombast from the government about how well we are doing. The enormous hole in the economy that was created in the first quarter of last year (April-June) because of the lockdown will have been filled over the last few months. When results for the same quarter year on year appear sometime in the middle of 2021, Modi will exclaim that we are the world’s fastest growing economy and pretend that the 25% increase is not just the filing up of a hole he himself created but some miracle he has delivered to the Indian economy.


The Economist reported that Mukesh Ambani’s wealth rose 350% in 2020 and Gautam Adani’s rose over 700%, but we are at record unemployment, which is hovering around the 9% mark. And it is not higher still only because many crore Indians have removed themselves from the job market. Those who are not employed and not actively looking for work are not considered unemployed. The real figure could be approaching 15% and perhaps even higher than that.

On every conceivable metric that you can think of, from bank credit growth, to automobile sale, the revelation is not only that there is no India growth story but there is a decline that has set us back years, perhaps a decade. And yet the triumphalism carries on.

Amjad Masood said…
Do you believe U.S should follow BD's example to jump start its COVID raged economy.
Media is too free and unruly opposition like Ted Cruise and Josh Hawley need to be brought to heels so we can focus on economic growth?

Look forward to hearing about your remedy for us here. Much closer to home.
Riaz Haq said…
Amjad: "Do you believe U.S should follow BD's example to jump start its COVID raged economy"

US is well past the development stages of countries like Bangladesh in the developing world. US economy the world’s largest economy. US$ is the global reserve and international trade currency. US can print as many dollars as it needs to recover from Covid. That’s exactly what the US federal reserve and the Biden administration are now doing.
Riaz Haq said…
Finland world’s happiest country; India 139th, between Sierra Leone & Burundi
World Happiness Report, now in its ninth year, places Denmark in second place, followed by Switzerland, Iceland and the Netherlands

https://thefederal.com/news/finland-worlds-happiest-country-india-at-139th-spot/

The COVID-19 pandemic, which has claimed more than two million lives so far, has had little effect on the ranking of the world’s happiest countries, with Finland taking the No 1 spot for a fourth straight year, an annual UN-sponsored report said on Friday.

Once again European nations dominated the top spots; the World Happiness Report, now in its ninth year, placed Denmark in second place, followed by Switzerland, Iceland and the Netherlands. New Zealand, which fell one place to ninth, was again the only non-European nation in the Top 10.

The report used Gallup data asking people in 149 countries to rate their happiness. India was at 139th position. Only Burundi, Yemen, Tanzania, Haiti, Malawi, Lesotho, Botswana, Rwanda, Zimbabwe and Afghanistan were classed as unhappier than India.


Among India’s neighbours, China was at 84th position, Nepal at 87th position, Bangladesh at 101st, Pakistan at 105th, Myanmar at 126th and Sri Lanka at 129th.

The report took into account measures such as GDP, social support, personal freedom and levels of corruption to give each nation a happiness score, which is an average of the past three years. But unlike in the past, this year the index included surveys on how countries have dealt with the pandemic.

This year’s report was faced with a unique challenge in trying to understand what effect the pandemic has had on subjective well-being and vice versa, the report said. Of all the factors usually supporting happiness, the most important for explaining COVID-19 death rates were people’s trust in each other, and confidence in their governments, it said.

The report said it was “no surprise” Finland once again took the top spot. It has always ranked very high on the measures of mutual trust that have helped to protect lives and livelihoods during the pandemic, it said.

The report quoted one of its authors, Jeffrey Sachs, as saying: “We need urgently to learn from COVID-19. The pandemic reminds us of our global environmental threats, the urgent need to cooperate, and the difficulties of achieving cooperation in each country and globally. The World Happiness Report 2021 reminds us that we must aim for wellbeing rather than mere wealth, which will be fleeting indeed if we don’t do a much better job of addressing the challenges of sustainable development.”

https://worldhappiness.report/ed/2021/

Riaz Haq said…
Bangladesh up 6 notches on happiness index

https://www.dhakatribune.com/bangladesh/2021/03/19/bangladesh-up-6-notches-on-happiness-index

Bangladesh has moved up six notches on the Happiness Index, ahead of India, Pakistan, Sri Lanka, and Myanmar.

According to World Happiness Report 2021 Bangladesh was ranked 102nd among 150 countries of the world, while India, Pakistan, Sri Lanka, and Myanmar placed 140th, 106th, 130th, and 127th, respectively.

Nepal and Maldives ranked higher than Bangladesh, with Nepal ranked 88th and Maldives 90th.

Bangladesh ranked the 108th happiest last year.

Finland, for the fourth straight time, was declared as the happiest country while Afghanistan came out at the bottom of the annual list prepared from data compiled by the Gallup World Poll.


The other two Scandinavian nations, Iceland and Denmark, ranked 2nd and 3rd while Switzerland and the Netherlands came in fourth and fifth positions.

The US moved up from 18th to 14th place and the UK dropped from 13th to 18th. Australia held its 12th place position.

The report ranks countries on six key variables that support well-being, including income, freedom, trust, healthy life expectancy, social support, and generosity.

Due to the ongoing Covid-19 pandemic, however, The World Happiness Report 2021 was assembled slightly differently.

This year, the researchers focused on the relationship between wellbeing and Covid-19 to ensure the countries are judged in light of the new normal.
Riaz Haq said…
IMF says #PMLN government overstated #Pakistan #gdp and understated #debt to gdp ratio starting in 2016. This was done as part of sovereign loan guarantees. Current #PTI government has taken remedial action to correct the error to #IMF's satisfaction https://www.imf.org/en/News/Articles/2021/03/24/pr2182-pakistan-imf-executive-board-reviews-remedial-actions-data-revision-noncomplying-purchase

The Executive Board of the International Monetary Fund (IMF) approved a 39-month Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan in the amount of SDR 4,268 billion (about US$6 billion), equivalent to 210 percent of quota, on July 3, 2019. The first review under the arrangement was completed by the Executive Board on December 19, 2019, based upon, inter alia, the reported observance of the quantitative performance criteria (PC) at end-September 2019, including the amount of government guarantees. Upon completion of the first review under the EFF, Pakistan made a purchase equivalent to SDR 328 million (about US$452.4 million).

Subsequently, new information that came to the authorities’ attention, and which was shared with Fund staff, has revealed that the data on government guarantees dating back to FY 2016 was reported inaccurately. The revised data indicates a nonobservance of the PC on government guarantees at end-September 2019 by a margin of PRs 357 billion (about 0.9 percent of GDP), which resulted in a noncomplying purchase and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement. The authorities previously reported that the PC had been met with a margin of PRs 55 billion (0.1 percent of GDP) at end-September 2019. The statistical revision only had a small impact on public debt.

The authorities have taken strong corrective actions to address institutional and technical short-comings that gave rise to the inaccurate information, including: (i) creating a working group to reconcile and cross-check guarantees and debt data; (ii) announcing additional functions for the Debt Policy Coordination Office (DPCO), including to act as custodian of all guarantees issued by the federal government; and (iii) publishing a semi-annual debt bulletin that consolidates key debt statistics. Beyond these actions, the authorities have committed to include a list of all new guarantees expected to be issued in the FY 2022 budget submitted to Parliament.

At the conclusion of the meeting, Deputy Managing Director Antoinette Sayeh and Acting Chair, stated:

“The Executive Board of the International Monetary Fund (IMF) reviewed Pakistan’s remedial actions and data revisions linked to a noncomplying purchase under the Extended Arrangement under the Extended Fund Facility as well as a breach of obligations under Article VIII, Section 5. The non-complying purchase arose as a result of a lack of inter-agency coordination in the compilation of government guarantees provided by the federal government to state-owned enterprises that contributed to incorrect estimates of government guarantees starting as far back as FY 2016.

Riaz Haq said…
#India is running out of money, Mr. #Modi. Embrace foreign #debt.Indian public sector banks were already struggling with the problem of unrealized loans, and the #COVID19 #pandemic was about to make that situation a lot worse. #economy #infrastructure https://asia.nikkei.com/Opinion/India-is-running-out-of-money-Mr.-Modi.-Embrace-foreign-debt

Like many central banks around the world, the Reserve Bank of India has pumped liquidity into the country's banking sector to help prevent an economic collapse brought about by COVID-19.

Since India's Prime Minister Narendra Modi announced a nationwide lockdown in March, the RBI has released around $50 billion in a bid to shore up bank liquidity, helping to avert imminent disaster. Indian public sector banks were already struggling with the problem of unrealized loans, and the pandemic was about to make that situation a lot worse. Recapitalizing the banking sector was a step in the right direction.

Now, as India shifts from the emergency phase to the recovery phase, Modi needs to consider his policy options carefully. For the first time in decades, India's economy is expected to contract. The private sector is no longer optimistic about the future and is unlikely to add much when it comes to long term investment. That means the onus to stimulate the economy will fall on the government, and an obvious way to do that is by kick-starting upstream infrastructure projects, which can have a positive spillover effect for the rest of the economy.

According to the McKinsey Global Institute, every dollar invested in infrastructure can earn up to 20 cents more in economic returns. For infrastructure deficient countries like India, the return will almost certainly be higher. Modi has put faith in an old Keynesian experiment. During the Great Depression, U.S. President Franklin Roosevelt's New Deal program included the launch of countless public works projects that helped to modernize America's infrastructure, created millions of jobs, and infused a sense of optimism that pulled the U.S. out of depression. Could such an experiment work for India?

Well, not if there is no money to finance it. Modi has promised to spend a whopping $1.4 trillion on infrastructure. But where will all that money come from? For now, the government of India is relying more on mobilizing resources at home. In May, it sold $4 billion worth of bonds. But they were mostly bought by state-run banks and financial institutions.

Three months later, India received $24.6 billion in dividends from the RBI. And here is the problem. The more money banks lend to the state, the less there is for business. Borrowings by the government and state-run companies are now set to exceed 13% of gross domestic product. Anecdotal evidence suggests that bank managers are increasingly reluctant to approve loans to small and medium sized enterprises. That is a shame. The private sector is the backbone of a healthy economy, making up 75% of total investment demand.

Banks, therefore, need to be adequately capitalized to meet regulatory requirements. Simply monetizing the debt by printing more money is not the answer. What India needs to do now is to look outside. On the bright side, India's external debt is not a cause for concern, with an external debt to GDP ratio of about 20%, among the lowest in the region.

Riaz Haq said…
Chinese company to carry out marketing for Rashakai SEZ

https://nation.com.pk/03-Apr-2021/chinese-company-to-carry-out-marketing-for-rashakai-sez


The China Road and Bridge Corporation (CRBC) would carry out the marketing campaign for the Rashakai Special Economic Zone under China Pakistan Economic Corridor (CPEC) expressing interest to work with the Board of Investment in this regard.

In a meeting with Minister for Planning Development and Special Initiatives Asad Umar here on Friday, the CRBC Vice President Sun Yaoguo along with a delegation said that external marketing of the SEZ to local and foreign investors was crucial for its full operationalization.

The meeting reviewed the Rashakai Special Economic Zone (SEZ) and CRBC’s mega-project Karachi Coastal Comprehensive Development Zone. The vice president of CRBC stated that the development work of Rashakai SEZ was being carried out at a fast pace and to that end the necessary resources had already been mobilized.

He assured the minister that the timelines for the projects would be strictly observed. The minister said that the industrial cooperation was the need of CPEC and the government was keen to see early completion of the project and the ministry of energy had already expedited the work on supply of electricity and gas to the SEZ.


He said that BOI would fully cooperate with CRBC for effective marketing of the SEZ. Asad Umar said that it was the first time in Pakistan that the foreign developer would be marketing an Industrial zone. He hoped that CRBC would be able to attract substantial investment in the SEZ from Chinese investors.

During the meeting Mr. Sun also briefed about CRBC’s mega project Karachi Costal Comprehensive Development Zone in collaboration with the Ministry of Maritime Affairs and the government of Sindh.

He said that the project would add substantially to the city’s economy landscape and would be generating employment opportunity for a very large number of populations of the city.

The minister said that the Karachi Costal Development Project was an important project and the federal cabinet had approved the signing of a Memorandum of Understanding (MoU).

It will give a boost to the business and technology sectors and provide employment opportunities to the people.
Riaz Haq said…
Pakistan has potential to push annual exports upto $88.1 bn: World Bank

https://www.app.com.pk/business/pakistan-has-potential-to-push-annual-exports-upto-88-1-bn-world-bank/

https://thedocs.worldbank.org/en/doc/884b60a84f16362376215acef470fb4b-0310062021/original/PDU-April-21-FULL-REPORT-FINAL.pdf


Given Pakistan’s observable characteristics in terms of economic size, level of development, remoteness, and factor endowments, it is estimated that Pakistan’s potential annual exports are at US$ 88.1 billion, about 4 times the actual current level, World Bank said in its recent report “Pakistan Development Update”.

This large gap between actual and potential exports, or “missing exports,” places Pakistan among the top quartile of the distribution of countries with missing exports. Were Pakistan’s exporters to tap into that potential, the resulting export-to-GDP ratio would place the country at around the middle of the distribution of countries according to export orientation. To reach that point, Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years.

The report said that the opportunity cost of Pakistan’s “missing exports” is estimated at 893,000 jobs and US$ 1.74 billion in foregone taxes. Of these, 152,000 jobs could be created in the agriculture export sector, and 741,000 jobs could be created in the
manufacturing export sector.

While some of these jobs could be newly created, others may imply the reallocation of labor from relatively lower productivity, domestic-oriented firms, to higher productivity, export-oriented firms.

In terms of foregone tax revenue, a back-of-the-envelope calculation suggests that realizing the export potential would bring an additional US$ 1.74 billion in direct tax revenues annually, taking into account Pakistan’s value added share in gross exports, as well as the implicit direct tax rate across sectors.

The report added that since the turn of the century, Pakistan has become a more inward-oriented economy. A long-term examination of export performance reveals structural stagnation.

In 1990, Pakistani firms served 0.19 percent of the world’s imports. By 2019, they served only 0.12 percent—a nearly 40-percent decline in their market share. As a share of the economy, exports stood at 16 percent of GDP in 1999, but less than 10 percent in 2020.

To tap into the export potential, Pakistan needs to upgrade its trade policy framework. Specifically, it needs to reduce the anti-export bias of tariff policy. This entails gradually reducing import duties across the board, as well as reducing the extent of the cascading by applying larger import duty cuts to final goods relative to intermediates and raw materials.

Analysis shows that protecting the domestic market through high rates of import duties, as the ones observed in Pakistan, comes at the expense of missing out in terms of exports, because it incentivizes firms to sell domestically rather than to export.

The high levels of protection observed in Pakistan carry a high opportunity cost in terms of export-oriented jobs lost, and a higher productivity path the economy could undertake.

Second the government needs to reorient trade enhancement schemes. Currently, schemes such as those put forward in Statutory Regulatory Order (SRO) 711(I) 2018, provide support to exporters that reach destinations with low export potential and low
dynamism, thus not leading to an effective and efficient allocation of scarce public funds.

High-potential Asian destinations should be targeted rather than low potential African, Latin American, or Pacific Islands ones.

Thirdly the Pakistan government needs to negotiate market access with high potential destinations. Central Asian republics are a high potential for Pakistan, because of high missing exports to those countries, and because of their import dynamism.

Riaz Haq said…
Year 2007 marked the beginning of “#democracy” fever led by the lawless lawyers of #Lahore in #Pakistan. Then came the country’s lost decade under corrupt dynastic rule of #ppp and #pmln. Result: Pakistan's per capita income lags #India, #EmergingMarkets http://www.riazhaq.com/2014/06/civilian-democracy-vs-military.html

https://twitter.com/haqsmusings/status/1381066500824465408?s=20
Riaz Haq said…
UNDP: Elite privilege consumes $17.4bn of #Pakistan’s #economy. Top beneficiaries are corporate sector (tax breaks, cheap input prices, higher output prices, access to capital, land) – 2nd & 3rd biggest recipients of privilege are richest feudal landlords https://aje.io/dvkng

The UNDP’s Wignaraja noted that this creates a paradox where those responsible for doling out the privileges were also those who were receiving them.

----------------
The biggest beneficiary of the privileges – which may take the form of tax breaks, cheap input prices, higher output prices or preferential access to capital, land and services – was found to be the country’s corporate sector, which accrued an estimated $4.7bn in privileges, the report says.

The second and third-highest recipients of privileges were found to be the country’s richest 1 percent, who collectively own 9 percent of the country’s overall income, and the feudal land-owning class, which constitutes 1.1 percent of the population but owns 22 percent of all arable farmland.

Both classes have strong representation in the Pakistani Parliament, with most major political parties’ candidates’ drawn from either the feudal landowning class or the country’s business-owning elite.
----------

Economic privileges accorded to Pakistan’s elite groups, including the corporate sector, feudal landlords, the political class and the country’s powerful military, add up to an estimated $17.4bn, or roughly 6 percent of the country’s economy, a new United Nations report has found.

Released last week, the UN Development Programme’s (UNDP) National Human Development Report (NHDR) for Pakistan focuses on issues of inequality in the South Asian country of 220 million people.

The report uses the prism of “Power, People and Policy” to examine the stark income and economic opportunity disparities in the developing country.

“Powerful groups use their privilege to capture more than their fair share, people perpetuate structural discrimination through prejudice against others based on social characteristics, and policies are often unsuccessful at addressing the resulting inequity, or may even contribute to it,” says the report.

Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP has been on a two-week “virtual tour” of Pakistan to discuss the report’s findings, holding talks with Prime Minister Imran Khan and other top members of his cabinet, including the ministers of foreign affairs and planning.

She says Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive action.


“[In our remarks in meetings] we focused right in on where […] the shadows are, and what is it that actually diverts from a reform agenda in a country,” she told Al Jazeera in an exclusive interview.

“My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land and capital access.”

----------------------

The country’s powerful military, which has directly ruled Pakistan for roughly half of its 74-year history, was found to receive $1.7bn in privileges, mainly in the form of preferential access to land, capital and infrastructure, as well as tax exemptions.
The report noted, however, that Pakistan’s military is also “the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects”.

“These things are not neatly separate entities,” said Wignaraja. “You do see some of… these are overlapping so you almost get a double privilege by the military. The minute in a country the military is a part of big business, it obviously doubles the issue and the problem.”

In a country like Pakistan, where the military continues to hold power over many aspects of governance, she warned that it would take “almost a social movement” to displace structures of power that were so entrenched.


Riaz Haq said…
Pakistan has an untapped export potential of $66.1 billion
The authors stress the fact that Pakistan's current policies such as protectionist trade policies, including high tariffs deterring the industries like the textile sector of Pakistan from modernizing, accessing global markets, and being regionally competitive.

https://www.globalvillagespace.com/pakistans-has-an-untapped-export-potential-of-66-1-billion/


The World Bank in its recent report states that Pakistan’s potential annual exports are $88.1 billion, about four times the current level. The opportunity cost of these missing exports is estimated at “893,000 jobs and $ 1.74 billion in foregone taxes alone, of which 152,000 jobs could have been created in the agriculture export sector, and 741,000 jobs could have been created in the manufacturing export sector.”

However, neglecting this potential by seeking short-term economic fixes, raising the cost of doing business, and making procedures unnecessarily bureaucratic has retarded any progress in the economy.

The present government took cognizance of the essential nature of regionally competitive energy tariffs to allow exports to even continue at the present level or increase marginally. However, there remains a large gap between actual and potential exports, or “missing exports,” placing Pakistan among the top quartile of the distribution of missing export countries.

Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years, to match its potential. This is quite achievable given the growth achieved in the past by China, Vietnam, and Bangladesh, but will require focused dedicated long-term policies, and a level playing field on energy rates in particular.

There is an urgent need for transparency and rationalization in Pakistan’s tariff policymaking. Import tariffs on industry inputs ultimately serve as a tax on exports thereby hampering the profitability of the very sector that is positioned to enable economic growth for Pakistan.

-----------

Research has shown that productivity in Pakistan has been stagnant and aggregate gains have been mostly driven by more productive firms gaining market shares. This situation is likely to persist if timely efforts are not made to ease import conditions, rationalize tariffs, value competition, and markets and modernize education in the country.

High-potential Asian destinations must be targeted as export destinations, rather than low potential African, Latin American, or Pacific Island ones.

Furthermore, the Pakistan government needs to negotiate market access with high potential destinations. “Central Asian republics are a high potential for Pakistan, because of high missing exports to those countries, and because of their import dynamism. Preferential trade agreements with Uzbekistan or Kazakhstan should be priorities, along with the negotiation of agreements on transit trade with Afghanistan to facilitate physical access to those markets.”

It is about time the government, academia, and industry linkages were strengthened to stimulate R&D and innovation, thereby paving the way for enhanced productivity. Policies should target and facilitate young innovative companies to build them up and help to modernize Pakistan’s business environment.

Furthermore, the focus should be shifted towards taxing profitability, as taxing before giving the chance to be productive would be akin to jumping the gun, and would stifle many potential startups. Tariffs on intermediate inputs hamper productivity downstream, creating burdensome import conditions. This phenomenon serves to increase the cost of production, hampers profitability, and results in price escalation. Products are thus rendered uncompetitive in the international market.

Riaz Haq said…
#Bangladesh GDP per capita has risen 9% last year, rising to $2,227, making it richer than #India & #Pakistan. Pak per capita income is $1,543. India’s per capita income is $1,947. Bangladesh #exports have grown at 8.6% every year vs 0.4% global average. https://www.bloomberg.com/opinion/articles/2021-05-31/india-and-pakistan-are-now-poorer-than-bangladesh


India — eternally confident about being the only South Asian economy that matters — now must grapple with the fact that it, too, is poorer than Bangladesh in per capita terms. India’s per capita income in 2020-21 was a mere $1,947.

Don’t hold your breath expecting India to acknowledge Bangladesh’s success: Right-wing figures in India are convinced Bangladesh is so destitute that illegal migrants from there are overrunning the border. In reality, Bangladesh is far richer than the depressed Indian states where Hindu nationalist politicians have been railing against Bangladeshi “termites.” It’s as if Mississippi were fretting about illegal immigration from Canada.

Perhaps that explains why Indian social media exploded with indignation and denial when the GDP numbers were announced. Meanwhile, Bangladeshi media have made little of the comparison. That’s the sort of self-confidence that comes from growing consistently.
-----------


Bangladesh’s growth rests on three pillars: exports, social progress and fiscal prudence. Between 2011 and 2019, Bangladesh’s exports grew at 8.6% every year, compared to the world average of 0.4%. The success is largely due to the country’s relentless focus on products, such as apparel, in which it possesses a comparative advantage.

Meanwhile, the share of Bangladeshi women in the labor force has consistently grown, unlike in India and Pakistan, where it has decreased. And Bangladesh has maintained a public debt-to-GDP ratio between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP. Fiscal restraint has allowed Bangladesh’s private sector to borrow and invest.

Bangladesh’s success brings its own set of problems. For one, its exports benefit from the country’s participation in various mechanisms that allow tariff-free access to developed economies, such as the U.S.’s Generalized System of Preferences. These groupings are only open to the world’s least developed countries. Thanks to its growth, Bangladesh will likely have to give up these privileges by 2026 or so.

As its economy matures, its comparative advantages will also change. Like Vietnam and others, it will then have to shift emphasis away from garments to higher-value exports. The transition will test Bangladesh as it has those other nations.

The government needs a strategy for the next decade that focuses on new forms of global integration and on a continued transformation of the economy.
Riaz Haq said…
CPEC to aid Pakistan’s industrial development

https://www.globaltimes.cn/page/202105/1224954.shtml

On the whole, weak foundation, and small scale are major problems holding back speed of Pakistan's industrial development. Industries such as cement and automobile manufacturing have long been overly protected, some analysts say.

Secondly, Pakistan's economic development relies heavily on external markets, but the dominant export industry, the textile industry, does not have outstanding advantages.

Thirdly, Pakistan has low domestic savings rates and low domestic investment rates. The Pakistani government attaches great importance to attracting and utilizing foreign investment, but the level of foreign investment in Pakistan is significantly affected by the regional and domestic security situations.

Fourth, low fiscal revenues and heavy external debt burdens have been major problems in Pakistan's economic development, limiting the government's ability to invest. The heavy debt burden has limited the government's ability to invest in public sectors.

Since the COVID-19 outbreak, the significance of the construction of the CPEC has become a key highlight for the country's economic development. The construction of the CPEC will play a supporting role in Pakistan's economic recovery in the post-pandemic era. Pakistan should seize the opportunity to formulate scientific development plans to advance domestic industries with competitive advantages.

Speaking of China-Pakistan industrial cooperation, agriculture is the sector that could help Pakistan consolidate its industrial advantages and industrial chain, and help the country quickly gain foreign exchange earnings through exports. At the same time, China should open its market to Pakistani agricultural products and fruits, and expand imports of Pakistani agricultural and industrial products.

The textile industry is a traditionally strong industry in Pakistan. When China's textile industry is shifting outward due to labor price rises, Pakistan should seize the opportunity to use the advantages accumulated by China's textile industry to upgrade its own industry and accept orders from aboard. In addition, the Indian textile industry has largely come to standstill due to the latest resurgence of the pandemic, and a large number of global orders have been transferred to other markets, including China.

Pakistan should seize the opportunity of global value chain and industrial chain restructuring to develop its emerging industries.

For example, since 2020, affected by India's increasingly hostile attitude towards Chinese companies, many Chinese mobile phone brands in India have begun to move their factories to countries like Vietnam, the Philippines, and Indonesia. This is also an opportunity for Pakistan.

Riaz Haq said…
Data compiled by the Ministry of Commerce showed on Friday, Pakistan’s exports of 13 sectors including value-added textiles posted double-digit growth in the 11 months of current fiscal year (11MFY21) compared to the same period a year ago.

https://www.paktribune.com/news-details/double-digit-growth-in-pakistan-export

Growth in exports of value-added sectors contributed to an increase in overall exports from the sectors. One of the reasons for growth in these sectors is due to low-base of last year when export-oriented industries remained closed due to the Covid-19 lockdown and cancellation of orders from international buyers.

Exports of home textile products were up by 27pc to $3.642bn in 11MFY21 against $2.879bn over the last year, followed by a 16pc increase in men’s garments to $3.505bn against $3.019bn last year. An increase of 33pc in women garments to $646.49m was noted against $486.52m over the corresponding months of last year.

Similarly, in the vale-added leather sector, exports of leather apparel posed a growth of 11pc to $584.02m in 11MFY21 against $528.02m over the corresponding months of last year, followed by an increase of 57pc in exports of jerseys, pullovers and cardigans to $530.14m against $337.39m in the same period in FY20.

Pakistan is one of the main suppliers of global surgical instruments. However, these instruments are re-marketed from western countries with famous brands. As a result, the export value of these products remain very less. The export of surgical instruments posted a growth of 17pc to $398.88m in 11MFY21 against $341.51m over the last year, followed by 23pc in gloves to $285.13m against $232.44m over the last year.

The export of pharmaceutical products posted growth of 27pc to $240.04m against $188.47m last year and worn clothing by 33pc to $228.47m against $171.18m over the last year.

Export proceeds of copper and articles thereof posted growth of 44pc to $463.17m between July to May 2021 against $321.95m over the last year, followed by 14pc in t-shirts to$453.4m against $398.79m last year, 15pc in made-up articles of textile materials to $432.47m against $377.24m of last year and 38pc in pantyhose, stockings, socks to $417.41m against $302.67m over the last year.
Riaz Haq said…
#Pakistan pins hopes on #export-oriented industries, #agriculture and #housing sector for sustainable growth. Keen to promote exports and take their volume from 8% at present to 20% of Gross Domestic Product (#GDP) in coming years. #economy #Budget2021 https://www.khaleejtimes.com/business/pakistan-pins-hopes-on-agriculture-housing-for-sustainable-growth

Addressing a joint post-budget press conference in Islamabad on Saturday, federal minister for finance Shaukat Tarin said the government has presented a growth-oriented budget that also includes relief measures to businessmen, investors, exporters, farmers and common man.

Federal Minister for Industries Khusro Bukhtiar, advisor to the Prime Minister on commerce Razak Dawood, special assistant to the Prime Minister on poverty alleviation and social protection Dr Sania and Federal Board of Revenue chairman Asim Ahmed were also present at the press conference and clarified various aspects of the budget.

Exports share in GDP

Tarin said the government is keen to promote exports and take their volume from eight per cent at present to 20 per cent of the Gross Domestic Product (GDP) in coming years. ”We have suggested various steps to promote exports that would help reduce pressure on the foreign exchange reserves, besides developing the local industrial sector,” he said.

The minister said the special economic zones being set up under the China-Pakistan Economic Corridor would also help in local industrial development and create job opportunities for the skilled and semi-skilled work force.

Agri sector development

Tarin said the government has proposed special initiatives for the development of agriculture sector and prosperity of farming community in the country.

“We accords special attention to small land holders up to 12.5 acres and will extend up to Rs450,000 interest-free loans to enhance agriculture production and alleviate poverty. We have also mobilised banking sector to extend credit facilities to growers at affordable rates,” he said.

“Every farming household would be provided Rs250,000 interest free loan for purchasing agriculture inputs. Another Rs200,000 will be provided to purchase tractor and other machinery to bring innovation and technological advancement in local agriculture sector,” he added.

The finance minister said development of marketing services, cold storage facilities and building strategic reserves of food commodities would also help curb the menace of hoardings, artificial shortage of food commodities and practice of extra profiteering.

Growth-oriented budget

Tarin, who presented PTI’s fourth budget on Friday, said the main focus of the growth-oriented budget is to empower the country’s poor segment so that they would not have to wait for trickle-down effect of economic progress.

“The government is directly targeting the poorest of the poor and facilitating them with different initiatives to upgrade their living standards. It would utilise the ‘bottom-up-approach’ for improving the living conditions of around six million low-income households,” the minister said.

Under the initiative, Tarin said every urban household would be provided Rs500,000 interest-free business loan. Likewise, every farming household would be given interest free loan of Rs150,000 for every crop, interest fee farming loan of Rs250,000 and interest free loan of Rs200,000 for buying tractor and agricultural implements.

“Low-interest loans of up to Rs2 million would be provided to help the people buy houses, besides Sehat Card to every household to facilitate them in time of need,” Tarin said.
Riaz Haq said…
#Bangladesh to go into nationwide hard #lockdown from Monday June 28, 2021. The daily #COVID #infection rate rose to 21.22%, up from 15% a week ago. #DeltaVariant #India https://www.dhakatribune.com/bangladesh/2021/06/25/bangladesh-goes-into-nationwide-hard-lockdown-from-june-28

All offices will remain closed; no one will be allowed to leave home without emergency


Amid the dramatic surge in coronavirus infections, Bangladesh is going into a nationwide hard lockdown from Monday (June 28) for seven days.

In a notification on Friday, the Information Ministry said that all government and private offices, except for emergency services will remain closed during the lockdown.

All kinds of transports, except for those carrying emergency supplies, will remain suspended, it said before adding ambulances and vehicles used for healthcare services and media will be exempted from the curbs.

No one will be allowed to leave home without emergency purposes.

The Cabinet Division will issue a detailed notification on Saturday, reads the notice by the ministry’s Press Information Department.


The announcement comes after the national Covid-19 advisory panel on Thursday recommended imposing a nationwide shutdown for two weeks, with all kinds of offices remained closed.

Soon after the panel made the recommendation, State Minister for Public Administration Farhad Hossain told the media that they were all set to impose a complete shutdown any time.

As Covid-19 cases kept growing at an alarming rate since mid-March this year, the government was forced to impose a nationwide lockdown for one week from April 5 to contain the spread.

Later, a stricter set of restrictions on public movement and gathering were extended several times, including the latest one till July 15.

Additionally, the authorities across the country has been imposing district-wise restriction on public movement in areas with higher Covid-19 infections till now.


But now, with the fresh directive, a strict lockdown will take place across the nation.

On Friday, the death toll from Covid-19 rose by 108, the second highest single-day jump since the pandemic unfolded last year in Bangladesh.

The caseload surged by 5,869 to 878,804, according to the latest government data. The daily infection rate rose to 21.22%, up from 15% a week ago.

Amid the dramatic surge in infections, public experts fear that the pandemic in Bangladesh could take a catastrophic turn.

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