Archive for the ‘Economic Development’ Category

My views on Dubai’s financial crisis are as follows:

(a) Dubai will need to drastically revise its development plans and rethink its financing model. The Emirate’s development model is based on “build it and they will come” premise as opposed to demonstrable or proven need for its spectacular, over-the-top projects. At the same time, its financing is heavily dependent on cheap and abundant foreign credit, a premise that exposes the Emirate to the vagaries of credit markets.

(b) Abu Dhabi – whose wealth is backed with proven oil and gas reserves, among the largest in the world – will not let Dubai “collapse” (as the political, social, and economic consequences of doing so will be severe for the entire UAE federation). That being said, Abu Dhabi will exact its proverbial “pound of flesh” in any bailout as well as force Dubai to “own up” to its overspending as opposed to expecting a “blank check” treatment.

(c) There will be a likely impact of Dubai’s financial crisis (ie. restructuring of sovereign debt) on debt issues of a speculative nature. Remember, Dubai – unlike Abu Dhabi – never had any hard assets against which it could borrow money. Rather, the entire Emirate sold itself as a “dream factory” (ie. Dubai Inc) and tried to create “something out of nothing” (ie. like Las Vegas springing from the desert) with foreign capital. That kind of speculative funding – whether for companies or for nations, especially in the emerging markets – will clearly become harder in the foreseeable future.

(d) There will be a major impact on labor markets that were acting as feeders for Dubai’s construction and services industries. The most important of these are India, Pakistan, and Bangladesh. That being said, the extent of the impact on a particular labor pool destined for Dubai (such as those in Kerala) will depend on the strength of the national economy as well as the integration of the regional labor pool with the national economy. For example, India’s strong economic growth – unlike Pakistan’s moribund economy – holds the potential to absorb “Dubai labor”. The extent to which it absorbs the labor, of course, depends on how well the “Dubai labor” – in different parts of India – can avail itself of employment opportunities in the country.

(e) Long term, I fully expect Dubai to survive and thrive for the simple reason that it represents an oasis in a heavily populated region beset with all sorts of strife and problems. The rich as well as the upwardly mobile in third world countries need a world-class place nearby to park their money, enjoy vacations, and plan for exile (if push comes to shove). Iran and Pakistan are excellent cases in point. Iranians are widely rumored to be among the biggest investors in Dubai on account of political uncertainty, poor economy, and social repression at home. They are followed by Pakistanis. A sizable chunk of the country’s black money is in Dubai while a number of families have secured residence permits (via purchase of free-hold property) as “insurance” against national implosion.


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A number of my fellow Pakistanis variously label me as a “Hindu lover”, a “RAW agent”, and a “Western infidel” on account of my views. I humbly request them to read the article quoted below by noted Pakistani business analyst, Dr. Farrukh Saleem, on the spectacular rise of India.

Dr. Saleem describes India’s: (a) ongoing transformation into an economic giant; (b) stellar record of stable parliamentary democracy; (c) world-class scientific and technological talent; and (d) contributions to mankind’s progress. More importantly, he explains the reasons Pakistanis have failed to progress despite being identical – yes, identical – to Indians: (1) inability to elect national leaders, (2) focus on destruction of another nation as opposed to construction of their country; and (3) obsession with religion and religious wars.

[Here is what is happening in India; Dr Farrukh Saleem; Capital suggestion; Nov 8, 2009; Excerpts; Copy and Paste]

Here’s what is happening in India: The two Ambani brothers can buy 100 percent of every company listed on the Karachi Stock Exchange (KSE) and would still be left with $30 billion to spare. The four richest Indians can buy up all goods and services produced over a year by 169 million Pakistanis and still be left with $60 billion to spare. The four richest Indians are now richer than the forty richest Chinese. In November, Bombay Stock Exchange’s benchmark Sensex flirted with 20,000 points.

As a consequence, Mukesh Ambani’s Reliance Industries became a $100 billion company (the entire KSE is capitalized at $65 billion). Mukesh owns 48 percent of Reliance. In November, comes Neeta’s birthday. Neeta turned forty-four three weeks ago. Look what she got from her husband as her birthday present: A sixty-million dollar jet with a custom fitted master bedroom, bathroom with mood lighting, a sky bar, entertainment cabins, satellite television, wireless communication and a separate cabin with game consoles. Neeta is Mukesh Ambani’s wife, and Mukesh is not India’s richest but the second richest. Mukesh is now building his new home, Residence Antillia. At a cost of $1 billion this would be the most expensive home on the face of the planet.

In 2004, India became the 3rd most attractive foreign direct investment destination. Pakistan wasn’t even in the top 25 countries.

In 2004, the United Nations, the representative body of 192 sovereign member states, had requested the Election Commission of India to assist the UN in the holding elections in Al Jumhuriyah al Iraqiyah and Dowlat-e Eslami-ye Afghanistan. Why the Election Commission of India and not the Election Commission of Pakistan? After all, Islamabad is closer to Kabul than is Delhi.

Imagine, 12 percent of all American scientists are of Indian origin; 38 percent of doctors in America are Indian; 36 percent of NASA scientists are Indians; 34 percent of Microsoft employees are Indians; and 28 percent of IBM employees are Indians.

For the record: Sabeer Bhatia created and founded Hotmail. Sun Microsystems was founded by Vinod Khosla. The Intel Pentium processor, that runs 90 percent of all computers, was fathered by Vinod K Dham. Rajiv Gupta co-invented Hewlett Packard’s E-speak project. Four out of ten Silicon Valley start-ups are run by Indians. Bollywood produces 800 movies per year and six Indian ladies have won Miss Universe/Miss World titles over the past 10 years.

For the record: Azim Premji, the richest Muslim entrepreneur on the face of the planet, was born in Bombay and now lives in Bangalore. India now has more than three dozen billionaires; Pakistan has none (not a single dollar billionaire) .

The other amazing aspect is the rapid pace at which India is creating wealth. In 2002, Dhirubhai Ambani, Mukesh and Anil Ambani’s father, left his two sons a fortune worth $2.8 billion. In 2007, their combined wealth stood at $94 billion. On 29 October 2007, as a result of the stock market rally and the appreciation of the Indian rupee, Mukesh became the richest person in the world, with net worth climbing to US$63.2 billion (Bill Gates, the richest American, stands at around $56 billion).

Indians and Pakistanis have the same Y-chromosome haplogroup. We have the same genetic sequence and the same genetic marker (namely: M124). We have the same DNA molecule, the same DNA sequence. Our culture, our traditions and our cuisine are all the same. We watch the same movies and sing the same songs. What is it that Indians have and we don’t? Indians elect their leaders!And also to mention: They think of construction of own nation, unlike other nations who are just concerned with destruction of others.

Simple answer why Indians fare better than Pakistanis: They don’t focus on religion and neither do they spend time and money in devising ways to kill their own and everyone else over religion.

The original article is available at: http://www.chowk.com/ilogs/74597/51561

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I am acutely aware of the massive poverty in India and the huge and growing disparity between the haves and have-nots. For example, according to Times of India: “…developmental agencies put the number of subsistence level Indians living on less than a dollar a day at 350 million and those living on less than $ 2 a day at 700 million. In other words, for every millionaire, India has about 7000 impoverished people.” What matters, however, is the national trend: (a) as a country, India is emerging as a major economic power on the global stage, with concomitant rise in military, diplomatic, and cultural power; and (b) as a population, economic liberalization and reforms are creating a growing middle class in addition to a super-rich class. Unfortunately, media everywhere typically tends to focus on the super rich and the super poor.

As per Times of India again: “India, with the world’s largest population of poor people living on less than a dollar a day, also paradoxically created millionaires at the fastest pace in the world in 2007 even though the world grew such “high net worth individuals (HNWIs)” at the slowest pace in four years. ” Again, what matters is the size, stability, growth, prosperity, and maturity of the middle class… as in my opinion, it is the middle class that forms the backbone of any society. Put differently, India’s rise in the world coupled with its economic reforms are not only increasing the ranks of its middle-class, it is also aligning emerging middle class’ aspirations with its counterparts in more developed societies on account of globalization. In Pak, the trend is exact opposite.

The quoted article is available at: http://timesofindia.indiatimes.com/biz/india-business/Poor-India-makes-millionaires-at-fastest-pace/articleshow/3162867.cms

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I hate sounding like a broken record, but the solution to Pakistani common man’s economic predicament lies in a wholesale revision of state ideology and concomitant state policies. This means, huge sums of money that are earmarked for defense need to be freed up for economic, educational, healthcare, and infrastructure development; a “warm peace” needs to be established with India to gain access to her investment capital, managerial talent, and import markets; the state and its institutions need to be officially de-Islamicized to facilitate introduction of modern education that can give rise of knowledge based industries (such as software); patronage of non-state actors for the purposes of strategic depth must be abolished to create socially and culturally tolerant atmosphere; and the concept of (Muslim) Ummah abandoned in favor of firm embrace of globalization.

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Indian economy is far better able to handle periodic shocks from terrorist acts than its Pakistani counterpart. This is largely a function of its self-reliant nature, which in turn is a direct consequence of the policies put in place by Jawaharlal Nehru after independence. It also helps that the Indian economy is much bigger in size than its Pakistani counterpart – and on account of economic liberalization policies of the past twenty years – is backed by deep national foreign exchange reserves, has access to international credit markets, enjoys a “halo effect” in international business circles from the brand-name acquisitions of its firms, and (due to its vibrant export and outsourcing sectors) is becoming/has become increasingly integrated with the world economy.

Pakistani economy, by contrast, is on life support. I really don’t know how else to put it. The state is practically bankrupt and the economy – just to stay afloat – is utterly dependent on foreign aid and loans. (That is a big part of the reason why despite all nationalistic bravado to the contrary, no Pak regime can refuse American diktats. America has been – and continues to be, for its geostrategic imperatives – the biggest benefactor and donor of Pakistan). Add to that – relative to its Indian counterpart – the much smaller size of the economy, lack of foreign exchange reserves, inability to access capital markets (without World Bank or IMF guarantees), nonexistence of international prestige via acquisitions, small export base of mostly low-value added goods, and an image of Pak as an unstable state, the slightest shock can shake the economy.

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Blog readers are welcome to label me a cynic, I for one reject the notion of solid or sustainable economic development of Pakistan over the past few decades. This is not because signs of “development” – as exemplified by modern amenities such as automobiles, cell phones, satellite TV, shopping malls, multiplex cinemas etc are not visible in Pakistani urban areas. This is because: (a) the developmental statistics routinely trotted by successive Pak governments are doctored, and (b) the development (such as it is) hides deep structural problems in the economy and state’s finances. Who can, for example, forget the “spectacular” official statistics of economic progress of Musharraf’s era and the subsequent ignominious departure of his PM and economic czar, Shaukat Aziz, due to the reality of widespread public economic hardship?

It is in this vein that I would like to draw attention to Irfan Hussain’s views on economic development of Pakistan posted below. I respect Hussain as a political, social, and cultural critic. However, when it comes to the economy, I feel he has fallen into the same trap of belief in doctored statistics and visible signs of prosperity in forming his views.

[The rise of Mehran man; DAWN; Irfan Husain; 17 Apr, 2010; Excerpts; Copy and Paste]

As riots erupt in Pakistan over power shortages and textile mill owners plan strikes, there is much talk about how the countrys economy is on the brink of collapse – yet again. What is being obscured here amidst the storm and fury is the solid advances the economy has made over the last decade.

For instance, in terms of purchasing power parity, Pakistan has the 27th largest economy in the world, while in dollar terms, it is the 48th biggest. GDP per capita has grown from $450 in 1999 to $1,250 last year. In 2005, the World Bank rated the ease of doing business in Pakistan as the highest in the region, and considered it higher than either China or India. While external debt increased from $39bn in 1999 to $50bn in 2009, poverty levels have fallen by over 10 per cent since 2001. Indeed, there are now around 30 million Pakistanis who are considered to be in the middle class with an average income of $10,000 annually, while some 17 million are now bracketed with the upper and upper-middle classes.

Even though this does not approach China’s and India’s spectacular progress in this period, it does represent a solid advance. If one factors in the political turmoil the country has gone through, together with its ongoing insurgencies in the tribal areas and Balochistan, Pakistans progress has been impressive by any standard.

The full article is available at: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/columnists/irfan-husain-the-rise-of-mehran-man-740

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The recent Forbes Global 2000 listing is a telling indicator of India’s rising economic might as well economic weakness of Pakistan. Fully 56 Indian companies are included in the prestigious list of the world’s 2000 most important firms while only one Pakistani firm made it to the list. Even more interestingly, a number of Indian firms are ranked among the top 500 of the Global 2000. These include firms such as ONGC (155), ICICI Bank (282), Indian Oil (313), NTPC (341), Tata Steel (345), Bharti Airtel (471). There is no way such unprecedented – and ongoing, not one-time – rise in India’s economic cannot not have an impact on the thinking of Pakistani Establishment vis-a-vis relationship with India.

India’s Global 2000 firms are discussed here: http://timesofindia.indiatimes.com/biz/india-business/56-Indian-companies-among-Forbes-Global-2000-list-/articleshow/5844262.cms

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