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Beyond the headlines of terrorism, Pakistan’s economy is on the rise

Discussion in 'South Asia & SAARC' started by Agent_47, Feb 27, 2017.

  1. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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    Shortly after Egypt’s 2011 uprising ended with the fall of President Hosni Mubarak, prominent Egyptian investor Ahmed Heikal said: “If we get things right, we could be Turkey in 10 years. If we get them wrong, we could be Pakistan in 18 months.”

    Everyone understood the subtext: Turkey was the model; Pakistan was the train wreck. After all, at that time Turkey had come off a decade of high growth, doubled its gross domestic product over the previous decade, tripled its per capita income and was still seen as an emerging-market darling. It even lent its first initial to the latest and newest acronym by Goldman Sachs’ Jim O’Neill (he of BRICS fame) — Turkey was the “T” in MINT: Mexico, Indonesia, Nigeria and Turkey.

    As for Pakistan, well, it was Pakistan, known mostly for terrorist attacks like the one perpetrated last week by an Islamic State suicide bomber that left at least 80 people dead and incited a furious government crackdown on militants. Headlines of terrorism, coups and instability, plus years of underdevelopment and poverty meant that no one was going to add Pakistan to a catchy acronym.

    But not so fast. Look beyond the headlines and see Pakistan today. It boasted the best stock market in Asia in 2016. The high-flying Karachi Stock Exchange Index is up more than 52 percent over the past year — and rising. The exchange broke through the vaunted 50,000 mark last month — a first in history. What’s more, Pakistan is winning plaudits from the International Monetary Fund, and its economy is forecast for a healthy 5.2 percent growth rate in 2017, according to the World Bank.

    As Pakistan turns a corner, Trump administration policymakers fixated on the terrorism threat just might miss this extraordinary opportunity in a country that has long been a terror bane. Three key factors are driving Pakistan’s economic awakening: an improved security climate even despite the most recent attack, relative political stability and a growing middle class. These three interlocking pieces are fueling Pakistan’s growth story — a vital story given the size and geopolitical weight of the nuclear-armed South Asian nation of nearly 200 million people.

    In mid-May, the world’s largest research-based provider of index funds, MSCI, will officially “graduate” Pakistan from its frontier-market category to the more prestigious — and well-capitalized — “emerging market” index. It will join 23 other countries on the index that represents 10 percent of world capitalization.

    Turkey is also on that index, but its fortunes are diverging rapidly. It is no longer the emerging-market economy on the rise, as it slows under the weight of political uncertainty, a deteriorating security situation, questions over its relations with the European Union and an intensified Kurdish militant insurgency in the southeast.

    Pakistani Prime Minister Nawaz Sharif and the generals may finally have gotten a reasonable handle on the deteriorating security climate — although attacks such as the suicide bombing at the Sufi shrine last week are likely to persist. And in 2013, when Sharif was elected, it marked the first democratic transition of power in the coup-prone country. Sharif entered office as the great global transformation taking place worldwide — of technological connectivity, rapid urbanization and rising middle class consumption — continued to churn. And Pakistan has not missed that train.

    Robust middle classes are vital to healthy societies and growing economies, and Pakistan’s middle class may have reached a tipping point, with some estimates suggesting that it accounts for more than half the population. Brookings Institution scholar Homi Kharas argues that Pakistan’s consumer middle-class market could hit $1 trillion by 2030. To be sure, the country still suffers from deep pockets of poverty, a backward education system and the jihadist threat, but as the middle class grows, demands will grow for more opportunities, better services and more security and stability.

    These middle classes are also attracting foreign investment. Ishrat Husain, former governor of the State Bank of Pakistan, told me that middle classes are driving impressive 25 percent rates of return for large multinational consumer companies such as Nestle and Procter & Gamble, and that the middle-class growth is sparking increased production of cement, steel, automobiles and the like. He sees it as one of the key reasons for current bullishness on Pakistan.

    That bullishness has led Pakistan to enter the emerging-markets acronym vernacular. One of the latest post-BRICS acronyms of rising economies making the rounds: VARP, for Vietnam, Argentina, Romania and Pakistan. Yes, that Pakistan.

    But the biggest test of whether Pakistan’s government can deliver might be something more simple: Will the lights stay on? Pakistan has an electricity problem. The country has long had electricity shortages with widespread rolling blackouts plaguing both urban and rural areas. In fact, Sharif made expanding electricity access a major campaign promise.

    Enter China. Pakistan’s giant neighbor has pledged a whopping $46 billion program to build the China-Pakistan Economic Corridor that will build new highways, overhaul railway and create new infrastructure to support 10,000 megawatts of additional power.

    If Pakistan succeeds in taming its electricity gaps with China’s help, the virtuous circle of growth will continue, and a key South Asian, nuclear-armed power could be headed for a decade of normalcy. If this materializes, that would be a big relief to the international community in dire need of countries of Pakistan’s size to begin delivering more for their people.

    https://www.washingtonpost.com/news...erm=.6dd9220f1dfa&wpisrc=nl_todayworld&wpmm=1
     
  2. SrNair

    SrNair Captain FULL MEMBER

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    Problem is Pakistan's overstretching of their resources.Their effort to achieve parity with India( a nation that is already outclassed them in miles) and intereference in Afghan matters took a heavy toll on them.
    CPEC is a loan based investment not a FDI based.
     
  3. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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  4. Inactive

    Inactive Guest


    Lol

    You didnt tag in .......

    On topic. It (Pakistani Economy) has great potential and can realise it ..... if it tackles two issues - governance and terror.

    As long as these remain unaddressed all attempts remain futile or sub par.
     
  5. Levina

    Levina Admin- Social media Staff Member ADMINISTRATOR

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    It's a feel good article for our neighbour's.
    Now when India's GDP has gone up, they too need an article or two to prove that they are not far behind...jst like when we test our missiles they test a few dud missiles, when we test a nuke they claim to have tested a MAHA nuke.

    Why not???

    Whatever let's them sleep peacefully. :)
     
  6. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    The good news is that China and USA have an agreement to keep Pakistan from imploding by helping out as necessary. Neither wants an unstable nuclear state.
     
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  7. Inactive

    Inactive Guest


    I have an alternate view of CPEC too but that shall need a radical shift in Pakistani and Chinese approach towards India..... unlikely even in dreams, the issue remains that as long as Kashmir issue is alive, CPEC is doomed. Also as long as China remains antagonist to India, this situation will remain sub par in terms of realisation.
     
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  8. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    CPEC is just a sideshow. USA and China are already doing things that are beyond Pakistan: improve power generation and distribution, direct income support for poor people, training the next cadres of middle class professional etc., all to stabilize a rapidly deteriorating country that is a danger to itself, its neighbors and the world.
     
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  9. bharathp

    bharathp Developers Guild Developers -IT and R&D

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    everytime they had a Big Brother (USA/KSA/China) taking care of them, their economy is on the rise. They hang on to their dear CPEC. They have growing population like us and most of the people are young. of course their GDP will increase. but is it increasing at the rate that it should have? I am glad that their GDP is increasing. atleast the focus will shift to comptetion on economy instead of who has got the biggest Nuke.

    oh btw,they ll probably will find a way to nuke our economy as well.
     
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  10. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    Pakistan needs to grow at about 7% just to keep its expanding population at existing levels of underemployment. Every year that undercuts this rate just makes things that much more unstable.
     
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  11. PARIKRAMA

    PARIKRAMA Angel or Devil? Staff Member ADMINISTRATOR

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    The problem I believe is a certain sub 5-5.5% real GDP growth..
    On top austerity is the last word that GOP follows..For example if they can work out a austerity package, postpone all defense purchases of any kind, government spendings being frugal and no new raising external debt by say 4-5 years, there will be a significant reduction in the total debt which they had borrowed with timely repayments and hence bringing down the outstanding principal..

    At the moment, all they do is spend money in everything and no fiscal control, no debt repayment planning.. nothing to talk about future..All eggs in one basket called CPEC..

    They have to realise, there is too much flab in the body of Pakistan.. it's an obese system.. got to reduce weight and she'd all that flab.. for that calorie intake control and reduction is much needed and also exercises to increase efficiency of the body and system.. if Pakistan can do that for 5 years.. a Austerity driven GOP plan and implementation, they can change the economy by a good margin.. also by efficiency they need to plug the issues of corruption and blatant wastage of nations resources..

    Sadly, I don't think GOP will ever realise what I said above..
     
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  12. bharathp

    bharathp Developers Guild Developers -IT and R&D

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    thats like feeding the devil because no one wants a hungry devil. What we all need is "no more devil"
     
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  13. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    Well, the devil is kinda clever. :D
     
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  14. VCheng

    VCheng RIDER GEO STRATEGIC ANALYST

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    Because it is not up to the GOP. The GHQ calls the shots. :D
     
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  15. Nilgiri

    Nilgiri Lieutenant GEO STRATEGIC ANALYST

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