Hot Money route to No Money!

Hassnain Javed

JANUARY 21, 2020

 

 

Paul Krugman, Nobel Memorial Prize in Economic Sciences and Distinguished Professor of Economics at City University of New York, wrote: “….foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.”

Professor Krugman further add: “Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.”

Keeping above in view throughout the years, consistently low investment rates are a promising sign for Pakistan, and it has become difficult to deal with the growing and developing economies, which are increasing at a much steady pace, rendering it a daunting challenge for the country. Structural flaws, legal and constitutional restrictions, enhanced tax compliance, policy instability and unexpectedness are major challenges to securing substantial conventional capital inflows into the country.

In order to have access to debt trapping, Pakistan has also been locked in a perpetual cycle of low-investment-low-saving generally results in private sector dragging out, which has constrained the country’s growth prospects. Regarding the regional economies, the investment rate in Pakistan is weakening both in absolute terms and as a percentage of GDP, which has adversely affected economic productive sectors like human capital, infrastructure, electricity, industrial sector, transport, agriculture, etc.

Resurrecting the economy is essential to government but securing foreign investors to invest in the country is equally valuable. The government’s economic team recently visited the US and Europe, and went out of their way to persuade and attract and retain investors to invest in government bills and bonds as lending rates are reportedly very high in Pakistan. Therefore, interest rates in Europe and the US are not so high, foreign investors will earn better returns by lending money to Pakistan due to high interest rates, while Pakistan can receive foreign currency, that will further help build its foreign reserves.

This is technically called Carry Trade and is also known as Hot Money. Hot Money means is an investment strategy concerning low interest rate borrowing and investing in an asset that delivers a higher rate of return. Pakistan has already been naturally drawn by international investors to some USD 400 million as Hot Money. SBP authorities believe that in the months ahead Pakistan will be able to raise up to USD 2 billion as hot money, while the Ministry of Finance will also finalize the recapitalization of Euro Bonds with a very attractive return rate.

Pakistan initiated foreign currency accounts (FCAs) in the early 1970s by providing the necessary and saving mechanisms to employees working overseas to draw capital flows to fund rising deficits. This scheme proved costly as accounts covered against the exchange risk, banks were granted a’ cushion’ advance cover on their foreign exchange liabilities towards the forefront by State Bank of Pakistan (SBP).

Hot Money means is an investment strategy concerning low interest rate borrowing and investing in an asset that delivers a higher rate of return. Pakistan has already been naturally drawn by international investors to some USD 400 million as Hot Money

In early 1990s, Pakistan opened up its economy, embraced liberal and market-oriented policies, and boosted private sector by introducing incentive packages eying capital flows. FCAs evolved into tax havens for international investors to park capital as a result of some legal measures to entertain tax evaders, which raised the country’s external debt and additional expense to the economy.

The trade liberalization regime’s adherents believe that financial capital markets and flexible exchange rates chase away free inflows of capital from one country to another to manipulate short-term gains that make the economies more susceptible. Due to the sheer trend of globalization, various global hedge funds began approaching Pakistani stock market and started pouring hot money for their narrow-term gains.

In order to complement the critical necessity of opening capital accounts during the first half of the 2000 era / decade, the liberalization process persisted and culminated in more openness and control, allowing foreign exchange companies promote structured inward remittance networks rather than hawala and hundi ones. With both the liberalizing procedures of foreign banks, industry-determined exchange rates, and financial reforms, in 2007 country garnered $8 billion in private foreign investment.

These foreign capital inflows exacerbated stock market and real estate speculations, which made them resilient contribution to degenerating competition in the country. If the prominence of Pakistan’s economy to the global economy is not as large as that of emerging economies, but in the past, it persisted highly susceptible and consistently felt the ‘ heat ‘ from economic shocks originating from international oil prices that chucked Pakistan into regular payment balance shocks. Successive governments have not followed any serious legislation on foreign investment policies to entice capital flows in human capital, superior technology, infrastructure, industry or business ecosystem.

Homeland has in the earlier days raised loans from foreign commercial banks or international cooperation agencies to build foreign exchange reserves at floating rates with short-term investment boundaries. All these previous activities of capitalizing hot money create major debt sustainability challenges, and destabilize the country’s external account.

In order to conclude, the current designated economic team needs to understand rather than living in fool’s paradise and assuring everything will get in align the short term benefits should be weigh against the tsunami of losses and economic disaster. As expressed in “Why nations fail” experiences should be taken as precedent. Pakistan economyhad experienced the severe backlashes of hot money due to its volatile nature. Such evidences are also found in the case of Mexico (peso crisis, 1994), Thailand (Baht crises, 1997), Russia (1998), Argentina (2001) which led to massive disruptions, fluctuations in foreign exchange market and at domestic front as well. In brief, IMF is also of belief the short-term debt is route to channelize higher financial crises. I will end my discussion with an urge to country Prime Minister and his economic team to religiously adhere to Chinese philosophy “it is better to teach a man to fish than give him fish”.

Industrial Emergency ( Part II)

Hassnain Javed

JANUARY 5, 2020

Subsequently, countries like Pakistan should explore new development strategies that minimize the greenhouse gas (GHG) emissions to accomplish clean growth. In the Pakistani context, the current growth pattern is not only unsustainable but also inefficient. Pakistan suffers from numerous socio-economic problems due to the country’s low productivity rate. This weak productivity is caused by the low domestic and foreign direct investment, lack of export and high unemployment rate that accelerates the internal migration. Thus, for solving all these socio-economic challenges, it is essential to set out a national strategy for the sustainable development in mega projects that can tackle all these circumstances without deteriorating surrounding environment, and Gilgit Baltistan development is one of these projects. This is extensively indispensable for the prosperity of not only the Gilgit Baltistan area but also for the Pakistan economy. Supporting the sustainable development in the Gilgit Baltistan economic zone is the efficient way to battle various macroeconomic challenges that hinder the country’s development without polluting the environment.

As per the Asian development bank, the success of the special economic zone depends on two factors: the extent to which these economic zones are linked with the whole economy, and the capability of the economic zone to support the economic transformation from a manufacturing basis to technological innovation

It is estimated that the projects that will be established in the Gilgit Baltistan economic zone are supposed to generate billion dollars annually once they are complete. Globally, special economic zones (SEZs) have become an integral instrument to enhance the country’s economic development. Per the World Bank, the establishment of a special economic zone in developing countries is a useful path to achieve the country’s inclusive green growth. These zones contribute directly to achieve the following: increasing the foreign exchange earnings; magnifying the country exports; integrating host country to the global markets; increasing the government revenues; increasing the technological knowledge transfer; and reducing unemployment. The Asian Development Bank, claimed that SEZs played a significant role to support the trade and investments during the economic recession in some countries. However, others skeptic doubted that SEZs have a positive significant impact on the host country as it has presented in the literature. Hence, assessing the impact of all the current sorts of special economic zones in the Gilgit Baltistan region is a necessity to hypothesize the extent to which these economic zones can achieve their objectives in Pakistan, and what are the major changes that are required to expand Gilgit Baltistan special economic zone successfully. Inside the Gilgit Baltistan special economic zones, the government should aim to attract more investments, which means stimulating more job opportunities for local and technological advancement for domestic industrial development. Meanwhile, the government should foster other economic activities outside the zone through generating synergies that encourage backwards and forward linkages with the whole economy. This means that Gilgit Baltistan special economic zones under certain measurements could be the instrument that helps the country to stimulate economic growth inside and outside the economic zone. As per the Asian development bank, the success of the special economic zone depends on two factors: the extent to which these economic zones are linked with the whole economy, and the capability of the economic zone to support the economic transformation from a manufacturing basis to technological innovation.

In order to conclude, Pakistan has everything going for it at the moment, and has the world’s attention firmly focused on it. With the government’s stated aims of promoting manufacturing, creating new jobs, upskilling the workforce, and fostering entrepreneurship and by declaring industrial emergency it makes sense that if SEZs are established they will act as stimulus for economic development. As a critical tool for the promotion of manufacturing and exports, SEZs have made a difference historically and is expected to reap extraordinary outcomes if executed in Pakistan. Moreover, it can also make a real difference in achieving all of the other key objectives of the government while encouraging ‘startupreneuships’ which is among the key goals of the current government.

The writer is Advisor (PITAC, Lahore operated under Federal Ministry of Industries and Production, Islamabad) and Foreign Research Associate (Centre of Excellence, CPEC, Islamabad)

Industrial Emergency (Part-I)

Hassnain Javed

JANUARY 4, 2020

Pakistan today is still not recognized globally as an upcoming economic superpower with robust growth, vast opportunities, and an aspirational middle-class. Besides many factors that make Pakistan a vital cog in the global economic system is its much-touted demographic dividend, driven by a large population of working-age youth. Although, such demographic dividend has been billed as a strategic advantage that will help propel the nation into the realm of developed country status.

However, recognizing that the dividend could just as well become a liability if not adequately leveraged and made capable of addressing the world’s challenges, therefore Pakistan government need to launch the Skill Pakistan and Startup Pakistan programmes. This much-needed focus on developing an environment and ecosystem to foster entrepreneurship has the potential to transform the country into a hotbed of innovation while creating large-scale employment, if implemented well.

Such initiatives have to be integrated and made to work efficiently with already existing programs that encourage industry and innovation. Only then can vibrant and sustainable ecosystems be built within a stable, yet dynamic business environment. Based on the developed economies experience, one highly successful policy initiative that has encouraged business activity over the years, especially export-driven business, is the Special Economic Zones (SEZ) programme that came into being through the establishment of special economic zones. While the key objectives of the SEZ programme are to attract foreign investment and boost industrial development, many of the benefits accorded to SEZs create an ideal environment for business ideation, employment generation, and upgrading of knowledge capital – all of which share common purpose with the earlier stated goals of leveraging Pakistan’s demographic dividend and fostering entrepreneurship.

There exists a misconception that the central role SEZs have played in boosting industrialization is on account of the fiscal benefits accorded to SEZ units. While financial benefits including various tax exemptions have great appeal to companies in capital-intensive manufacturing industries, there are a host of other benefits of operating in an SEZ that are often overlooked. SEZs are self-contained enclaves with infrastructure designed for industry, and often are integrated townships with social infrastructure also included. Logistical and warehousing infrastructure and backward and forward linkages enable smooth operations and vast opportunities. Single window clearances, ease of startup, and procedural efficiencies are also characteristic of SEZs. With focus being on exports, SEZs are usually located in proximity to ports, thus enabling easy movement of goods. All of these factors come together to enable the entrepreneur to focus solely on their core competencies and responsibility of growing the business.

There exists a misconception that the central role SEZs have played in boosting industrialization is on account of the fiscal benefits accorded to SEZ units

SEZs offer immense opportunities for contract manufacturing in mineral resources, gem and stones, food processing, and many other high-growth sectors. With digital transformation and the new economic order profoundly impacting these and many other industries, they are ripe for disruption through product and process innovations. And SEZs are well positioned to provide a robust platform to these new-age businesses. We only have to look at the Chinese model to learn how entrepreneurship and wealth creation have blossomed within SEZs. Many of China’s wealthy entrepreneurs have built their businesses within SEZs, taking advantage of infrastructure, logistical, supply chain and other benefits offered by them. In fact, they have become the epicenter for manufacturing economies in many parts of the world, and have propelled these economies to new heights.

Today, I put forth the case of Gilgit Baltistan special economic zones, which requires industrial emergency and dire attention by the current government to best exploit the competitive edge over existing natural and mineral resources prevalent in the region. Poor utilization of the competitiveness of the Gilgit Baltistan special economic zone is one of the ambiguous issues that has held the Pakistan economy back from a genuine chance towards sustainable transformation and rapid economic growth. Since the independence of Pakistan in 1947, development in the Gilgit Baltistan zone has been slow, focusing only on essential aspects without attempting to cope with changing global conditions. However, inability to adapt to these global changes may threaten the Gilgit Baltistan competitive edge in the near future. In this context, development in the Gilgit Baltistan region is essential to expand its role from domestic facilitator to international contributor in global trade which reinforces its economic growth, contribute to solve various socio-economic problems, and promote the environmentally sustainable practices in Pakistan.

Accordingly, the Pakistan government started their first wave of the transformational reform after launch of the Belt and Road Initiative by the Chinese government in 2013. Under which China-Pakistan Economic Corridor development initiated that further introduces sustainable development strategy for Pakistan, and by 2017, the Gilgit Baltistan area has declared a special economic zone. These initiatives provided new roadmaps covering the inclusive green growth in the country that could be achieved through sustainable utilization of the Gilgit Baltistan zone. In a developing country like Pakistan, accelerating economic growth while also protecting the environment are interlinked challenges, neither of which can supersede the other. Accordingly, it is important to support the sustainable development in Pakistan to achieve the country’s prosperity without destroying the environment. In this regards it is essential to address this question, why sustainable development is a must in this modern era? Globally, developing countries have to stop 1.4 billion people out of abject poverty by enhancing their economic growth; meanwhile, ensuring that these economic activities are correlated with the low carbon growth which reduces the aggregate carbon footprints.

Gilgit Baltistan: a peace of heaven!

Hassnain Javed

DECEMBER 22, 2019

There are tons memories concerning the plight of 1.3 million individuals of Gilgit-Baltistan (GB), who stay in fragile surroundings at the mercy of nature. Beauty, peace, tranquillity and serenity are the terms related to this some distance-flung region of West Pakistan. GB is loosely described as a centrally-administered, partially-empowered and economically-based part of West Pakistan. With all its natural endowments of gemstones, and mineral and water resources, the location is one in every of the simplest tourist locations of the planet.

In step with a conservative estimate, GB has the ability to generate annual revenue of $1 billion from its natural resources and tourism, and fetch the once a year revenue of $10 billion through renewable power. In this foundation, GB isn’t always nearest impartial but conjointly has the ability to emerge as the maximum critical sales generator for Pakistan economy.

With all its ability of prosperity, GB is marred by way of a lease-in search of, corrupt and inept political device that runs through an inflated paperwork and a disempowered local regulation-makers. The Empowerment and Self-Governance Order 2009 defines the legislative, administrative and felony capabilities of governance in GB – together with the precept of separation of powers some of the native parliament, judiciary and forms. Although the 2009 order offers authority of regulation to the local assembly on key topics of economic, political, cultural and criminal affairs, it does no longer outline the procedures that would affirm the link with the federation vis-à-vis monetary developing.

As there is no formulation of resource allocation and distribution supported by the appearance and recommendations of the local regulation-makers. Having no provincial repute inside the constitutional framework, GB isn’t always eligible for the National Finance Commission (NFC) award. Considering budgetary allocations area unit preset and high down, they neutralize the effect of nearby law. This pinnacle-down approach of political management has decreased the capability, power, will and dedication of the GB government to devise an organic procedure roadmap for the place. Subsequently, there is a large disconnect between the GB government and additionally the national on vital matters relating to local development.

For instance, with the devolution of powers to provinces beneath the eighteenth change, GB stands nowhere in the countrywide development coverage. For the reason that vicinity isn’t ruled underneath the constitution, there are not any empowering edges of the eighteenth change for it. More notably, after the devolution of powers to provinces, the federal government doesn’t appear to own any comprehensive political strategy of integration GB into this devolved mode of political governance. The GB government and various ministries of the federal government have their own interpretations of position and duties once the eighteenth change. there may be no resource allocation components additionally as development making plans apart from the transfer of finances to GB as a legal responsibility of the countrywide.

Then again, the 2009 order affords a complex system of useful distribution of body powers among federal and native forms. The cutting-edge political and administrative setup lacks the institutional arrangement of answerableness, transparency and inclusivity on important subjects of public interest – cross from financial aiming to benefit-based hiring of employees on development comes.

There have been political appointments on key positions of foreign-funded improvement tasks. As an example, the IFAD-funded Economic Transformative Initiative (ETI) granted to the GB government is a 5-yr included monetary development programme of worth $120 million. The ETI shows how political appointments end result into unskillfulness and corruption, and collusion for evading tracking and accountability. This challenge ought to carry concerning transformative modifications by means of establishing powerful agricultural really worth chains and development programmes to assist local farmers improve their effective functionality.

Delays and irregularities in the implementation of the mission display inadequate expert credentials of venture control. The ETI is being carried out thru the coming up with and development division unitedly with the task organizer under the supervising of the Chief Secretary of Gilgit-Baltistan. That is the biggest overseas-funded development programme inside the place with the ability to deliver entrepreneurial opportunities and enhance the first-rate of dwelling. Despite the fact that, the undertaking has not been able to meet its development targets. Fraught with delays in implementation, the undertaking does no longer have a robust best assurance and commentary perform to make certain transparency of fund allocation and its utmost utilization.

Constructing new economic zones for CPEC will profit West Pakistan in the means of business development and make employment opportunities for native individuals of Gilgit Baltistan

The untapped development capacity of this place is a hazard for investors in enterprise alternate, energy, minerals and border substitute. GB has the capacity of generating 70,000 megawatts of renewable strength from its hydrological resources, but most of its district’s location unit plunged in darkness. The maximum vital tourist destinations, consisting of Hunza and Skardu, lack simple infrastructure to deal with vacationers. There may be quite 16 hours of loadshedding on each day in Hunza by myself with surprising power outages including salt to damage.

Final year, a million vacationers visited the location notwithstanding the very reality that there has been no incentive or facilitation from the GB authorities. The neighborhood hoteliers and visitor residence homeowners used excessive electricity diesel and gasoline turbines to form up for the dearth of electricity. This turned into quite damaging to the natural environment and uncovered local citizens to metastasis sicknesses. Maximum of the vacationers visited the Khunjerab pass, which become turned, into a garbage net web page within the absence of a solid waste disposal machine.

Within the context of mounting improvement in demanding situations, the sensible coverage choice for the federal authorities is that the integration of GB in the national improvement programme below the constitutional framework. This will, optimistically, result in stepped forward accountability, efficiency and political authorization.

Thus, it is proposed as Gilgit Baltistan is the “Bottle-neck, so to say, is located on the corridor”. Consequently, it’s far crucial to ensure that the bottleneck doesn’t cripple the ability of this corridor. The government must set up an inexpensive economic improvement in Gilgit Baltistan to reinforce the economy of individuals. The dry port should not shift to Havalian to guard native enterprise and jobs. The authorities must sell neighborhood manufacturing and exportation of culmination of Gilgit Baltistan within the worldwide marketplace. To attain economic development, it is going to be necessary to stay in thoughts the balance between the ecological footprint (useful resource call for) and additionally the bio-potential (aid supply) in Gilgit Baltistan. The ecological footprint throughout the planet has been growing inevitably as its ability has dwindled, main to a state of deficit. To be able to avoid the poor fallouts of improvement resulting from the projected corridor a special bill of citizens’ rights ought to be introduced. Each event would like to introduce a belongings development determine to shield the environment of Gilgit Baltistan from all terrible elements of the corridor.

So as to shape CPEC a hit, there are some simple issues, that ought to be looked after which location unit covered; coercion, provision of environmental safety, advent of latest special economic zones, and unique attention needed at the environmental impacts of this task on Gilgit Baltistan, and so forth. Executive has to adopt more complete policies as for Gilgit Baltistan regulation-makers. Leaving the tradition and parochial mentality of taking the covert and unilateral choices, GB’s leadership must be taken on board on each call developing related to the China-Pakistan economic corridor. There is immediately need of training the younger era in numerous trades applicable and wanted for economic corridor linked professions in Gilgit Baltistan. Constructing new economic zones for CPEC will profit West Pakistan in the means of business development and make employment opportunities for native individuals of Gilgit Baltistan.

Therefore, for effective implementation of Special Economic zones in GB there should be status quo of smooth development mechanism cellular, sustainable land control, set up of weather surveillance measuring tool at GB, carbon neutral GB and country wide Biogas Plan within the area. Moreover, there are environmental issues in GB that include the pollution of air and water resources, erosion of soils, melting of glaciers, an increase of temperature, and the upward thrust of the flood through warming, because there is loss of biodiversity and increase the amount of greenhouse gases effect.

How Azerbaijan established a link between Europe and Asian Belt? (Part II)

Hassnain Javed

NOVEMBER 30, 2019

Azerbaijan has previously purchased Chinese arms, including that of the Qasirga T-300, a defensive weapon system who used it to promote artillery units that reveal indirect / blind shots in all weather conditions against targets. Even the Polonez multiple launch rocket system was set up in collaboration with China, which Azerbaijan bought from Belarus.Russia’s weapons need not offer Azerbaijan a competitive advantage over its greatest rival Armenia since Russia supports Yerevan the same or even even superior weaponry. At the very same time, Baku sees full approval with China in the interest of helping with the peaceful settlement of the Karabakh conflict, primarily by fully supporting the cause of Azerbaijan at the United Nations.

In this framework, there are favorable developments in trade turnover between Azerbaijan and China. A number of negotiations were signed during Aliyev’s visit to China. For example, on the basis of these deals, the China National Electrical Engineering Company (CNEEC) will invest $300 million in a tire factory in Azerbaijan, an investment that guarantees to create 800 new jobs and increase the production potential of the plant to 3.3 million tires per year. Another multi-million-dollar deal would have seen investments in agriculture. Indeed, the signed agreement package increases the amount of Chinese investment in Azerbaijan to the incredible degree that developments can be considered a defining moment in relations between the two states.

Imports from China rose by 40% in 2018, with trade profit margin achieving $1.3 billion. Especially in comparison to Armenia and Georgia, Azerbaijan has now become China’s number one trade partner in the South Caucasus. Imports from China rose by 40% in 2018, and trade turnover rose to $1.3 billion. Similar to Armenia and Georgia, Azerbaijan is becoming China’s number one major trading partner in the South Caucasus. Around 119 Chinese-based companies operate in Azerbaijan. However, China’s trade with the region remains much behind its trade with, for instance, about $10 billion in Kazakhstan or about $6 billion in Uzbekistan (2018).The Chinese BRI initiative was passionately welcomed by Baku’s democratic establishment, although many of the Chinese projects are largely unaware of the public. Chinese investment helps to bring the financing gaps in the national development plan for Azerbaijan, allowing several projects to step forward that would have otherwise been challenging.

China’s geographical penetration can also create fanatical attitudes from traditional partners like Turkey and Russia. Turkey sees the region as an area of its geopolitical interests, but it would not, however, resist China’s investment

The first container to use the BRI route traveled over 4,000 km from China in a six-day record to the newly built Baku International Sea Trade Port in August 2015.With regional transport links, it marked a new era. It showed Chinese firms that, via this BRI transit, cargo could enter Europe much faster than by sea or Russia. These transport characteristics and developments were highlighted by both Kazakhstan and Azerbaijan to incentivize Chinese businesses to invest more in their settlements. The Azerbaijani officials believe that some 300,000-400,000 shipments will be transported via the Azerbaijani route by 2020, resulting in revenues of billions of dollars.

Both the public and the political establishment in Azerbaijan argue that because of its geographical distance, China doesn’t even have a political agenda in the region. Therefore, Chinese projects are deemed exclusively from an economic perspective. Chinese investments seem to be supportive with falling oil prices and fewer cash reserves in the country. In addition, China is considered as a country that is quick to deliver and execute projects. Unlike the US and the EU, both hampered by bureaucratic obstacles, and Russia, which puts geopolitics ahead of economics, China is viewed as a trustworthy and sensitive partner.

Comparing China’s transnational interconnection program with Russian or EU integration projects, it appears clear, first of all, that China does not threaten the EU’s political ideology towards the region as much as the Eurasian Economic Union (EEU) could. The Chinese initiative, like the EEU, doesn’t even have the narrow-term ideological position of exercising economic and political power / control over post-Soviet Eurasian states. In the longer run, China’s plan will provide political and economic support resources for countries to get closer to Beijing. As of now, Azerbaijani-Russian relations are also not overwhelmed by anything but problematic issues or events, but Baku was able to reschedule that decision despite Moscow’s push for Azerbaijan to join the EEU.

China’s geographical penetration can also create fanatical attitudes from traditional partners like Turkey and Russia. Turkey sees the region as an area of its geopolitical interests, but it would not, however, resist China’s investment. At that same time, while Russia has no resistance with China, in its sphere of influence, Moscow perceives the South Caucasus. Baku is well aware of this issue and hence continues to build on the economic front slowly and carefully relations with the “Eastern Giant” while maintaining friendly or neutral diplomatic relations with the other major powers involved in the region.

 

How Azerbaijan established a link between Europe and Asian belt? (Part I)

Hassnain Javed

NOVEMBER 28, 2019

Azerbaijan is situated at the junction of main routes of Eurasian land and air transport. The Azerbaijani government has deliberately tried to turn the country into a link between Europe and Asia since it gained independence. It has invested billions of dollars in commercial infrastructure and transport projects over previous decade. It is trying to finalize the construction of the fastest growing port in the Caspian Sea (60 kilometers south of Baku in Alyat), it has helped establish the Baku-Akhalkalaki-Kars railway, and it is transforming the Baku airport into a modern hub. Dramatically reducing travel times between both the Caspian Sea and the Azerbaijan-Georgian border, 550 kilometers west of Baku, have invested a lot of money in the road system.

The key idea of these initiatives is to place Azerbaijan as a promising linkage between Asia, Central Asia, the South Caucasus, and Europe. Baku recognizes the importance of instituting methodologies for diversification in anticipation of the degradation of hydrocarbon reserves in the country. Many ventures, indeed, may not be feasible or necessary by their peers. Political dynamics, too, can unnerve the plans of Baku.

With America’s declining engagement in the South Caucasus and the EU’s weak position in dealing with Brexit, the vacuum has started to be filled by other major powers and key centers of gravity. Even as powerhouses like Russia are using hard power to continue in the region, others are investigating alternative means of reinforcing their local hand. China is among the new forces that has gradually raised its power in the region and are now seeking to play a significant role.

China have never risen to the level of concentration and coordination with the region as it has with traditional partners such as the EU, the US, Russia, or the states of Southeast Asia. Institutionally, China-Armenia, Azerbaijan-Georgia relations have been good, yet none of the countries deemed the relationships long-standing or strategic.

Advisor (Pakistan Industrial Technical Assistance Center, Lahore operated under Federal Ministry of Industries and Production, Islamabad) and Foreign Research Associate (Centre of Excellence, China Pakistan Economic Corridor, Islamabad)

Geographical proximity and the lack of substantial Chinese investment did almost nothing to move the partnership forward. Indeed, China’s strong interest in hydrocarbon resources, and also the possibilities for transport routes through Azerbaijan and Georgia to broaden its trade (and influence), has led it to pierce the region with its massive economic resources continuously. Even though other stakeholders such as the US and the EU have undergone difficulties in ties with the South Caucasus, the popular Abraham Lincoln quote could best describe Chinese policy: “I walk slowly, but I never walk backward.” China is the dominant world power for Azerbaijan today, that can sometimes invest much-needed funds in infrastructure projects and help combat Russia’s growing influence.

Since 1992, bilateral relations between certain two countries have been developed and collaboration around them has formed positively from here on. In parallel to the Karabakh conflict, China has mostly defended and acknowledged Azerbaijan’s territorial sovereignty. Such unquestioning support for Azerbaijan comes from the repudiation of any regionalism by Beijing’s own status. Considering its own issue with Taiwan’s power play region, China has overwhelmingly supported the Azerbaijani government in UN territorial integrity-related voting, and has obtained corresponding attitudes from Baku. In Azerbaijan, Beijing was caught up in only a few oil projects, often for purposes of governance rather than economic benefits; it wanted a presence without massive suspension of disbelief. Relationships were good, but neither side saw it as a critical partner.

China’s Belt and Road Initiative (BRI) project launched in 2013 (known as One Belt, One Road until 2016) gave catalyst to strengthening interactions between states along the new Silk Road. When China launched this revolutionary plan, Azerbaijan responded positively because Baku desperately needed players willing to fill the vacuums left by an extremely disconnected West. It anticipated that land routes and high-speed rail connectivity between East Asia and Europe would carry in Chinese funds and enable Azerbaijan to take a share of the transport benefits.

Beginning in 2015, their political ties commenced to strengthen in Beijing and Baku. President Ilham Aliyev visited China in December 2015, met with the democratic establishment of the country, and called on Chinese firms to invest in Azerbaijan. The Asian Infrastructure Investment Bank, created by the Chinese initiative, accepted a $600 million loan in 2016 to establish a segment of the Trans Anatolian Natural Gas Pipeline Project (TANAP) which transports natural gas from fields in Azerbaijan via Turkey and to markets in Southern Europe.

Aliyev went on a struggling visit to China in April 2019 to attend the second international forum of the BRI and met with the leader of China. A week subsequent, Azerbaijan’s defense minister paid an official visit to China and the sides communicated further military cooperation, specially buying Chinese military equipment from Azerbaijan. The activity ended with a contract signed on Chinese arms purchase and joint military assistance.

Building Entrepreneurial Youth through Corporate and Social Philanthropy than Credit Schemes (Part-II)

Hassnain Javed

OCTOBER 30, 2019

It is important to understand that every challenge from everyday life to economic challenges is complex but there are solvable through guiding principle approach adoption and genuine collaboration. There could be significant improvement highlighted if there is confidence that diverse actors and institutions involved will jointly collaborate to drive progress. International organizations are already cottoned on to the fact that youth entrepreneurship is core to the process of solving the SDGs. Despite this, governments are still lagging.

For instance, in Pakistan by having a glance at the rapid move toward highly innovative and technology-driven economies it would be good to invest and build the digital youth that brings together the next generation of digital innovators, shaping and mapping Pakistan’s digital future that can create new jobs and opportunities. It will help to redefine Pakistan as an emerging technology hub. There could be promising results if this strategy is primarily focused on KNPs that come with the added benefit of growing innovative startups, investments in infrastructure and interest from international businesses to create more than 75,000 jobs. Today, 50 percent of the people in Pakistan are age 30 and below. Young men and women stand to gain significantly from global opportunities. Therefore, there is dire need to continue to invest in their skills and mold their ideas into new products, services, and successful businesses that will benefit us all. There is a further need to refine policies and investments to attract investors and turn the region into the next business processing outsourcing center, which has the potential to create many jobs for women and men.

There is a need to take this opportunity to connect Pakistan’s youth to a global and networked economy. In this dynamic and globalized world, the youth of even the most far-flung areas of Pakistan will increasingly have an opportunity to work, to make money, and to innovate through virtual connections whether at the office or home.

The most powerful tools to spark entrepreneurship and crowd source innovation are competitions and prizes. Either government can create their prize programs or harness existing ones, they are a proven way to begin building an entrepreneurship pipeline

The market for digital entrepreneurship, a multi-billion-dollar industry, growing at a rapid rate and is thirsty for young talent. With creativity and passion, it can be at the forefront of social and economic change. I hope the fresh blood will be in the driver’s seat of this exciting future.

To conclude my discussion, I hereby propose five concrete steps I believe governments can and should take to create positive change through youth entrepreneurship. Two of the most powerful tools to spark entrepreneurship and crowd source innovation are competitions and prizes. Either government can create their prize programs or harness existing ones, they are a proven way to begin building an entrepreneurship pipeline. Moreover, the promotion of entrepreneurship must be grounded in local contexts and the problems that are required to solve should be impact-centered. Policy in this area needs to be considered in the context of young people’s lives today, and what is on their mind – as for many young people this means pursuing impact as well as profit. Furthermore, young minds should be given a seat at the table. Generally, policies and initiatives are rarely successful if the decision-making process does not engage the end recipient as under the 30s make 51% of global population whereas only 2% of them are representative at highest forums. Then, there should be the provision of specific entrepreneurship training for young people as entrepreneurship itself is a distinct skill set which is increasingly demanded by corporate and political recruiters. Therefore, policies meant to encourage youth entrepreneurship must enable young people to learn the skills necessary to pursue this path successfully. Lastly, there should be showcasing and creating case studies of successful youth entrepreneurs who have been supported by their government that in turn show others that this route is possible for them. As Alibaba’s founder Jack Ma said in the early days of his business: “We will make it because we are young and we never, never give up.” The power of youth entrepreneurship is not to be underestimated as a value creator.

Building Entrepreneurial Youth through Corporate and Social Philanthropy than Credit Schemes (Part I) 0

Hassnain Javed

OCTOBER 29, 2019

According to the United Nations, in the present world, there is an approximately $2.5 trillion funding gap between the individuals and the actualization of the sustainable development goals (SDGs). However, on the flip side of the coin on in five people globally is aged between 15 and 34; the cherry on top there are either unemployed, not engaged in any formal education nor involve in specific training. And mostly, developing poor economies like Pakistan is experiencing this global indeed more of an economic and social change at a rate of more than 70%. But, upon pondering this challenge has a fair chance to materialize and exercise as an opportunity only if authentic recipe with the right mix of ingredients, perfect garnishing, and packaging done like a pro to attract the target audience. Moreover, addressing youth unemployment and the promotion of entrepreneurial ventures is a town of talk at the highest international forums and agencies. But, the dilemma is either the western developed economies or poor nations governments have designed the right plan of action to address this rising global challenge cohesively?

Recently, Pakistan Prime Minister Imran Khan keeping in view the global yet local challenge of rising youth unemployment and paving the way to promote entrepreneurship has launched the “Kamyab Naujawan Programme” (KNP). Although, the program is launched still it fails to address the market and information asymmetries as there was no coherent research conducted to first identify the market demand and supply gaps. As experienced by the previous government’s youth loan initiatives this is again a repetitive series of fooling the uninformed audience and wasting the most valuable time. Upon reviewing the details of the program the major elements are vague. For instance, a total of 100 billion rupees has allocated for this purpose whereas the budget for the current fiscal indicates apportioned amounted to 450 million for the KNP. Thus, it is unclear whether the amount announced by the Prime Minister is for the current year alone for it entails the remaining period of his tenure.

Also, it is further declared by the Prime Minister that loans granted to youth will be made under three categories which entail (i) interest-free loans available for those seeking credit amounting to Rs.100,000, (ii) concessionary loans made available for those who seek a loan from Rs,100,001 to Rs. 500,000 but the actual cost of borrowing was not yet declared for public and (iii) those seeking for Rs.500,001 to Rs. 5 million loans would be giving regular loans at the interest rate of 13.25 percent which is I believe fairly not a lucrative option for the masses keeping in view the current economic chock down being experienced by the large-scale to medium and small-sized manufacturing firms. Now, having a glance at these three categories we could picturesque the motive behind it that is fairly not the promotion of small scale start-ups that is defined by the State Bank of Pakistan as the working units comprise of up to 50 employees and generating an annual turnover of Rs.150 million annually. These programs will only inject the unemployed to stay in a static state and indeed act as a source of income. Moreover, it is also not clearly stated how much money will be allocated under each category from the total fund.

New Skills for youth should help upgrade the existing worker’s skill set that further revitalize the cities and promote minority small business owners to gain the required resources to flourish and channel their economic contribution to society

Therefore, the current government should handle the KNP’s loopholes with two possible options. Firstly, the pre-requisites to attain the loan under the first and second category stated above is same thus from a bank perspective it would be less profitable for banks to hire staff for each category separately. It is recommended to make necessary adjustments in the two categories that are attractive for banks to enthusiastically promote in this initiative. Secondly, the major setback for all previous easy credit schemes is the lack of collateral of applicants which must be addressed as the main ingredient of the KNP and situation persists even with the current scheme. In actual this initiative has major similarities to former Prime Minister Nawaz Sharif’s Youth Programme that incorporates the interest free loan scheme, Prime Minister’s youth business loans, Prime Minister Youth Skills development scheme, Prime Minister’s scheme for the provision of Laptops and Prime Minister’s scheme for reimbursement of fee of students from less developed areas. In actual design for these programs are highly ambitious given the number of initiatives. Moreover, interest rates in the previous scheme are pretty much lower than the current discount rates.

The Government of Pakistan needs to strategically address this challenge into an opportunity by developing a government, industry, and academia strong cooperation and integration through public-private partnerships by having an effective association of Career Technical Entrepreneurial Education Consortium. The primary objective of this association should be to germinate “New Skills for Youth” that is designed to dramatically increase the number of fresh blood who have completed their career pathways that should start from middle school and end with postsecondary credentials align with high-wage and high demand jobs to narrow the market asymmetries. Moreover, New Skills for youth should help upgrade the existing worker’s skill set that further revitalize the cities and promote minority small business owners to gain the required resources to flourish and channel their economic contribution to society.

Circular economy a viable solution for developing economies

Hassnain Javed

OCTOBER 17, 2019

To meet the needs of future generations, fundamental change in the way we use natural resources is necessary. Current global resource extraction patterns are inconsistent with internationally agreed goals to limit global average temperature increases to below 1.5 ° C above pre-industrial levels. Redirecting to a sustainable growth direction would require significant changes in both the productive use of primary resources and a significant degree of primary resource replacement with secondary materials – those obtained from waste streams and reused or reconditioned for further use.

The definition of ‘ circular economy ‘ is increasingly becoming a new robust growth model. A circular economy is one where goods and services are recycled, repaired and reused instead of disposed, and waste from one industrial process becomes a prized input into another. The design and optimization of resource ‘ loops ‘ across value chains can help meet the material needs of growing populations by drastically lower levels of primary resource use per capita. The concept of circular economy is now a fundamental component of both the 2050 Long-Term Strategy for the EU to reach a climate-neutral Europe and the five-year plans for China. Japan placed the circular economy as a priority for the G20 Summit in 2019.

In contrast in our country Pakistan, given significant development and political progress, inadequate attention has been paid to circular economy pathways and the same situation prevails in other developing countries. Structural and political conditions, as well as the faster pace of growth and industrial development, would demand different strategies to those implemented in developed countries; for example, the agricultural sector has so far received minimal attention in global circular economy discussions, but will need to play a central role in the circular economy pathways of developing countries. Innovation is already occurring in developing countries, in the agricultural sector and well beyond, and policymakers in developing countries are starting to implement aggressive policies for more resource-efficient and circular industrial growth patterns. The circular economy presents the conventional manufacturing-led growth model with a compelling alternative strategy for industrial development and job creation. The circular economy remains mainly recognized as a tool for waste management and recycling, but the economic opportunities are much wider and more complex. The adoption of this model could provide new business opportunities for economic differentiation, value creation and skill development with the right supporting conditions. Developing countries like Pakistan should take advantage of the new economic opportunities in a strong position. A wide informal industries are already involved in’ circular’ practices-for example in areas such as electronic waste (e-waste) and telephone repairs -and could engage in supply chains with higher-value circular economy. Therefore, with appropriate investment, developing countries can’ leapfrog’ developed countries to incorporate sustainable production and consumption at the core of their economies in digital and material innovation.

A transition to a circular economy carries with it some trade-offs that need constant monitoring. In the absence of a systematic and strategic approach to the circular economy at national or international level, there is a danger that under the circular economy umbrella companies will pursue perfunctory-or, at worst, negative-practices that discourage more efficient and higher-value use of content. For example, waste-to-energy projects using under-standard waste disposal methods may carry environmental and human health risks and may also rely on more suitable waste sources for previous-life goods. Exchange-offs may also occur where circular proposals suggest major industrial policy shifts: in mineral-intensive economies, for instance, circular strategies may promote value-added, but may also threaten job losses among those working in resource extraction and basic processing.

National governments in developing countries must recognize synergies between the circular economy and existing national plans and conduct an analysis of the scope of opportunities for transition to a circular economy through key economic sectors

Circular economy’s progress in developing countries will be important in ensuring sustainable growth for global efforts. Developing countries will already be global production centers and are expected to become major market drivers. Progress now in incorporating circular concepts in industrial growth and strategies for infrastructural development will help meet the needs of rising and rapidly expanding populations while balancing against a continuing increase in primary resource usage, related emissions, and pollution. For instance, the CE can help deliver quality housing and infrastructure at low economic and environmental costs by following flexible, responsive and resilient design principles. Circularity in international value chains and the governance and investment structures needed to enable a global circular economy need to be given greater attention. In 2015, East African countries imposed a ban on secondary textile imports to protect their domestic industries, worried about China’s entry into the market of large volumes of cheap second-hand clothes. The ban was replaced by an import tax after the US threatened retaliation, but the episode demonstrated how, if not carefully managed, trade in secondary materials could lead to conflicts with conventional sectors and between countries. And the implementation of a complete ban on solid waste by China in 2018 brought to light the importance of creating integrated, open supply chains in waste and secondary materials if hazardous waste disposal activities are to be avoided and circular economy value chains are to emerge on a scale. In order to agree on common rules and standards for international circular value, greater cooperation is needed at global level.

There is an immediate need to extend the global circular economy conversation to include developing countries and to invest political and financial capital in promoting an inclusive, global circular economy growth. Governments in developed countries have an important role to play in fostering meaningful dialog on how best to manage the global complexities of circular economy policies. Support from international agencies such as the UN Industrial Development Organization (UNIDO) and the UN Environment Programme (UNEP) will be critical to facilitating the piloting of circular economy solutions among small and medium-sized enterprises (SMEs) in developing countries and along international value chains to demonstrate the viability of cross-border circular value chains at scale. And proactive engagement by multinational companies with suppliers in developing countries – including SMEs and those operating in the informal sector – will be necessary for circular activities to be scaled up in a manner that is inclusive and avoids the displacement of vulnerable workers.

Therefore, in order to conclude I believe action is required on three fronts firstly by aligning the circular economy with current technology policy priorities. To incorporate the circular economy into high-level business policies and policy planning, decision-makers need trust that circular economy solutions are aligned with sustainable development priorities, including promoting stable economic growth and providing the most vulnerable people with opportunities. National governments in developing countries must recognize synergies between the circular economy and existing national plans and conduct an analysis of the scope of opportunities for transition to a circular economy through key economic sectors. Governments of donors must embrace the circular economy as an industrial development tool in developing countries and raise funds to support the innovation and expansion of circular economy. Secondly, there is need for continuity to invest in the basics in developed countries to support the transition to the circular economy. There will be a need for effective governance mechanisms, inclusive policies and collaborations at national, regional and international level to create an enabling environment for testing and rolling out circular economy activities. Thirdly, there should be support for an inclusive international circular economy strategy that encourages cooperation and partnership. Trade and cooperation are key ingredients in speeding up the circular economy in developing economies, and leveraging foreign investment will rely on harnessing opportunities for innovation.

Hope or ringing alarm: un visit 2019!

Hassnain Javed

OCTOBER 11, 2019

After a week-long appraisal and welcoming to our Prime Minister by his massive directionless direction audience both internationally and locally marked another unplanned strategic move played by the untrained chess player where sometimes it seems feasible to step back and let others go further for backfire and winning after on lose-lose situation. It reminds many of us four decades ago when Mr. Z A Bhutto had torn his speech in the United Nations Security Council meeting and walk out with his delegates. As being the strategic leader he was able to identify it is useless to voice out for people of Kashmir, Palestine or either Yemen at the forum which is governed and administered by the strong Jews-Zinest lobby. The speech which was kept unread four decades back was read in the most recent visit when neither we are in state or in position to address the consequences.

Bhutto was able to encapsulate the literal meaning of the word consciousness. At the moment, more than 70 percent is dependent on multinational firms to meet their necessities. Thus, multipolar world order cannot be ignored and Pakistan is no position to get into other traps like we are suffering for many years in terms of pledged Pakistan by the International Monetary Fund. Upon the quick glance, the first visit by the Prime Minister and meeting with Donald Trump was the tactical game move by the anti-Pakistan players as literate could perceive how Mr. Trump offered a mediating role over Kashmir issue when it was not out of context in the conversation and followed by the US extensive visit we have heard the news of implication of Article 370.

Likewise, besides the huge round of appraisal Pakistan citizens should be mentally prepared for the consequences of the second visit. After the implication of Article 370, it is clear the beautiful lady is raped and his culprit despite handcuffed in the jail is enjoying the pleasure. Therefore, it is useless to beat the trumpet over the concern which is out of context and despite unlimited efforts to assure the justice the virginity cannot be regained once it is lost. Once, Huggtinton has said in his book on “New World Order” that in the upcoming future there will be a war on cultural conflicts rather than traditional war conflicts. If we recall, as Bhutto walked out of United Nation he immediately called for the Islamic Summit conference and if not the superpowers but hold of strong Islamic poles by having Col Qaddafi from Libya and Shah Faisal from Saudia Arabia among his pool to give away a strong message. This was the time when Bhutto realized the urgency of becoming a nuclear state and with his, all efforts enabled Pakistan with this blessing.

Since the half-decade, it is heard from the existing ruling party that the concept of Rastiye Madinah will become applicable and in every scenario, it is generally fixed as well. But, just stating the concept will not serve any purpose until unless its basic features and in-depth knowledge is not gained. The basic ideology of Rastiye Madinah was to establish regional connectivity which was among the most threatening challenge. There was “Kaiser o Kasra” prevailing at that time with Iran being the superpower. Therefore, letters on diplomatic fronts were being sent for peace dialogue and treaties until the sound base was prepared for the equal war footings.

It is useless to visit those international bodies which are already operated by the Jewish lobbies. Instead of the US, Pakistan should be focusing more on creating regional connectivity by having strong ties with China and Russia

There is no doubt Mr. Prime Minister has performed a foolish act of bravery by speaking more than his both internal and external bearing capacities. At the moment, by giving a message of war and being fearless to address every worse situation it is important to understand the grey realities. Pakistan armed forces among the top in the world are not able to handle this issue in long run as either its war or prosperity in both the situations the three key ingredients of management is the value that includes material, man and money. Unfortunately, Pakistan is badly lacking on the material and financial front and even with available human resources it is of no use as they are not trained. There are prevailing food insecurities and poverty in many parts of Pakistan and the state of war situation is going to get worse if not better.

Therefore, the need of the time is to focus on developing strong and effective strategic reforms that have one division of training on Islamization to channelize the Islamic ideology not only to the international world but also the locals through the implementation of the Iranian concept of Hajuat Ul Ullah and Ayat Ullah. Currently, the western powers are following the clash of civilizations.

In my view, it is useless to visit those international bodies which are already operated by the Jewish lobbies. Instead of the US, Pakistan should be focusing more on creating regional connectivity by having strong ties with China and Russia. For instance, by having President Xi Jinping and Mr. Putin by Imran Khan on his sides to address the Kashmir issue would have marked the difference. Last but not the least, the rising climatic issues were highlighted and certain agendas propose to address the challenge but again it is important to note every developed or either emerging economy before becoming green they have to get dark.