CPEC: The bigger scenario
Why is Washington making a song and dance about the China-Pakistan Economic Corridor (CPEC)? Are their reservations with regard to the multi-billion programme rooted in deep concerns for Pakistan’s long-term wellbeing?
Do – like caring parents who believe their naive child should give a wide berth to bad company – they want Islamabad to keep the Chinese at an arm’s length? Or do the Americans look upon the corridor as a strategic ploy by Beijing to put its stamp on the region at their expense?
From the American perspective, as outlined by a senior State Department official, Alice Wells, twice during the past three months, the substantial capital inflows under CPEC are a Greek gift for Pakistan, which is already heavily indebted to foreigners – governments as well as multilateral institutions. The more the programme grows in size; the more funds will Islamabad have to borrow from the government and banks in China. As a result, the debt repayment obligations of the country will continue to inflate, forcing it to shore up its borrowing to work off the credit. That will be a classic case of debt trap from which, as a rule, the borrower finds difficult to get out. The argument seems valid. But, like any other valid argument, it may comprise questionable premises.
In order to appreciate CPEC and its implications for Pakistan, we need to look at the bigger picture from both China’s and Pakistan’s standpoints – not to speak of the US perspective.
CPEC is part of China’s flagship Belt and Road Initiative (BRI). As China sets its sights on becoming an economic superpower, it’s putting high premium on four things in the main: seamless and efficient trade flows, food and energy security, moving up the value chain in manufacturing, and development of its relatively backward regions.
China’s impressive economic growth over the past four decades has been export driven. The share of foreign trade in the country’s total economic output is 40 percent, which is exceedingly high considering that as a rule large economies tend to depend less on foreign sales and purchases. The Asian giant has been among the biggest beneficiaries of trade liberalization and opening up of markets worldwide and is keen that the phenomenon should continue.
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Govt likely to offer OGDC stake to Malaysia
Pakistan is likely to offer Malaysia a possible seven percent stake in Oil and Gas Development Company Ltd (OGDCL), as the two countries will focus on boosting trade links during Prime Minister Imran Khan’s scheduled visit to the south east Asian country next week, official sources said on Monday.
The government has also invited Malaysian energy firms to bid for oil and gas exploration blocks in Pakistan to inject fresh investment as well as technology in this sector, petroleum ministry said in a separate statement.
An official on the condition of anonymity told The News that since Malaysian government had strongly supported Pakistan on diplomatic front on various issues, and Pakistan also wanted business, so it should do it.
“The same offer has been made for G2G arrangement,” the petroleum ministry official said. The petroleum division statement said Malaysian energy giant Petronas was likely to enter Pakistan to exploit this sector’s immense untapped potential.
“There is a possibility of Petronas acquiring divested shares from OGDC, PPL (Pakistan Petroleum Ltd), and Mari Petroleum that will be divested to shared partners,” said Nadeem Babar, Special Assistant to PM on Petroleum, talking with Ikram Muhammad Ibrahim, High Commissioner of Malaysia, who called on him and the energy minister.
The statement quoted the petroleum adviser as saying that Malaysian investors could also benefit in areas such as LPG (liquefied petroleum gas), refinery upgradation, etc, while Petronas could favorably look at LNG (liquefied natural gas) infrastructure development opportunities in Pakistan.
Federal Minister for Energy Omar Ayub Khan, who was leading the meeting, invited Malaysian investors to fully participate in the auction of oil and gas blocks that would be offered to foreign investors shortly with 18 initial blocks in the first phase.
Both the government officials briefed the Malaysian diplomat on the structural reforms being carried out in the energy sector of the country with special focus on the ‘ease of doing business’ in the energy sector of Pakistan, the statement said.
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Traders’ team invited to Indonesia
Totok Prianamto, consul general of Indonesia, has invited the industrialists of North Karachi to find new ways of trade in Indonesia, a statement said on Wednesday.
Speaking at a meeting with the NKATI members during his visit there, the consul general said his government wants to further strengthen bilateral trade relations with Pakistan, and he would play the role of a bridge to bring the two countries’ business community closer.
The Indonesian diplomat advised the NKATI members to visit Indonesia and hold B2B meetings with their Indonesian counterparts. He assured that visas will be issued on a priority basis.
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Vietnam registers us$100 million deficit in January
Vietnam posted a trade deficit of US$100 million in the first month of 2020, the General Statistics Office has reported.
Exports during January fell 15.8 percent from the previous month to an estimated US$19 billion, with the domestic sector having shipped US$6.31 billion worth of goods abroad, down 23.1 percent.
The foreign sector, in the meantime, recorded total revenue of US$12.69 billion, including oil revenue, a decrease of 11.6 percent.
The United States remained the largest buyer of Vietnamese goods, purchasing US$4.8 billion in January, followed by China and the EU with US$3.7 billion and US$2.6 billion, respectively.
Vietnamese exports to ASEAN and Japan were both at US$1.6 billion while exports to the Republic of Korea reached US$1.3 billion.
On the opposite side, Vietnam imported US$19.1 billion worth of goods in January, down 14.4 percent compared with the previous month.
Imports by the domestic and foreign sectors dropped 17.7 percent and 11.3 percent, respectively.
China was the largest source of Vietnam’s imports, with an estimated US$6.2 billion in the first month of 2020, followed by the Republic of Korea and ASEAN at US$3.2 billion and US$2.4 billion, respectively.
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Business briefs: Thailand cuts 2020 growth forecast
Thailand’s Finance Ministry yesterday cut its 2020 economic growth forecast to 2.8 percent from the 3.3 percent projected three months ago, citing weaker exports, a delayed budget and the spread of a new virus from China.
The ministry slashed its estimate for 2020 exports, a key growth driver, to a rise of just 1 percent from an earlier 2.6 percent increase, said Mr Lavaron Sangsnit, the head of the Finance Ministry’s fiscal policy office.
“Despite the downgrades, the economy is still growing,” he added. “The major drivers will be private investment and large public investment projects”.
The ministry estimated that the economy grew 2.5 percent last year, the weakest pace in five years, after expanding 4.1 percent in 2018. Official 2019 gross domestic product data is due on Feb 17.
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S.Korea’s business sentiment slightly worsens in January
Sentiment among South Korean businesses over economic situation slightly worsened in the first month of this year, central bank data showed Thursday.
The business sentiment index (BSI) stood at 75 in January, down 1 point from the previous month, according to the Bank of Korea (BOK). The reading below 100 indicates pessimists outnumbering optimists.
The BSI among manufacturers rose 2 points over the month to 76 this month, but the figure for non-manufacturers declined 5 points to 73 in the month.
The enhanced sentiment among manufacturers was attributed to an increased sale of chip-related components and semiconductor equipment.
Amidst the slump in the construction sector, the sentiment among builders tumbled 9 points in the month, leading to the overall worsening of sentiment among non-manufacturers.
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Singapore-listed companies with China exposure feel the heat
The shares of Singapore-listed companies with exposure to China were hit on Tuesday, as the Wuhan virus outbreak continued to escalate.
Of all Singapore companies with a market capitalisation of S$100 million and above, 44 have at least 20 percent of annual revenues coming from China, going by data obtained from the Singapore Exchange’s (SGX) research team. Of these, 35 stocks registered declines amid the general market fall on Tuesday.
As the number of infections from the Wuhan virus continues to climb in China and elsewhere, SGX-listed companies driven by Chinese tourism or which have operations in China are particularly vulnerable, with business and consumer sentiment undermined by fears of contagion.
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Hong Kong businesses cancel promotional events, launches and spring lunches as coronavirus fear grips city
Business events ranging from exhibitions, property sales and financial product launches to spring receptions have either been cancelled or delay across Hong Kong, as a result of the Wuhan coronavirus outbreak.
The cancellations, the worst since the 2003 severe acute respiratory syndrome (Sars) outbreak, are likely to affect the sales of financial products and real estate in the city, one of the world’s largest international financial centres, analysts said.
A joint annual spring reception organised by 10 industry bodies that represent 600 Hong Kong stock brokerages, to be held on February 5, is among events cancelled recently.
“As a result of the outbreak, we have decided to cancel the event, as we are concerned about the health and safety of all attendants and staff,” said Gordon Tsui, chairman of the Hong Kong Securities Association.
Tsui said the annual event, usually attended by more than 1,000 traders and government officials, is the largest annual event of the securities industry in the city. This year’s event cost about HK$300,000 (US$38,598) to organise, and the cancellation means the organisers will have to give up a deposit equally half of this amount.
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Japan’s top business lobby calls for review of uniform base pay rise system
Japan’s most powerful business lobby on Tuesday called for a review of the Japanese practice that sees industrywise labor unions demand a uniformed raise in base pay, saying the performances of individual companies and employees should be reflected.
“There is a big gap in the business environment and profitability among companies in the same industry so collectively and uniformly demanding wage increases no longer fits the reality,” Hiroaki Nakanishi, chairman of the lobby known as Keidanren, told a forum in Tokyo before the annual labor-management wage negotiations kick off.
At the event attended by representatives of labor unions and company officials in charge of personnel management, Nakanishi also sought a review of the country’s long-held practices, including automatic wage increases on the basis of employees’ age or length of service and employment until retirement age.
Nakanishi, head of the Japan Business Federation, said some companies have already changed their wage systems so that they can better reflect the performances of each employee out of the need to respond to the competitive and fast-digitalizing global economy.
Japan’s largest labor organization, meanwhile, maintains its conventional demand for wage increases, seeking a uniform pay hike totaling 4 percent — around a 2 percent raise in workers’ basic pay in addition to a regular wage hike based on seniority.