Economic & Political Weekly 12th May, 2019

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World

Politics

·  Japan tests world’s fastest bullet train      

Japan has started testing its fastest-ever bullet train — capable of reaching 400 kilometers per hour (249 mph) — as it continues to develop the revolutionary mode of travel. The ALFA-X version of the Shinkansen train began three years’ worth of test runs on Friday. Once it enters operation sometime around 2030, it will run at speeds of up to 360 kph (224 mph), comfortably making it the world’s fastest bullet train. It will also outpace China’s Fuxing train, which runs at 10 kph slower despite being designed with the same top speed capabilities as the ALFA-X.

· Thai parties cry foul after election results favor military junta

 Long-delayed results of Thailand’s first election since a 2014 military coup released on 8th May produced no clear winner but gave a pro-army party a clear advantage in its bid to install the current junta leader as an elected prime minister. The opposition threatened legal action against 8th May results, saying that a new seat allocation formula robbed the “democratic front” alliance of a majority in the 500-seat House of Representatives. The results are likely to set up a period of coalition building, since neither the pro-military bloc of parties nor a “democratic front” opposition alliance so far has enough votes to elect a prime minister under rules written by the junta. Any government that emerges is likely to be weak, because even if the junta leader’s party forms the government, it will still have to contend with the possibility of defections with allies in the lower house to pass legislation. It will still be weeks before any government can be formed while a junta-selected committee finishes appointing the Senate, the 250-seat upper house of parliament that will vote together with the elected House to choose the prime minister. Still, 8th May results made it more likely that the party of coup leader Prayuth Chan-ocha will stay in power because it needs fewer allies among small and medium-sized parties to get to the 376 votes needed to elect the prime minister in the combined House and Senate vote.

·South Africa is the world’s most unequal country. 25 years of freedom have failed to bridge the divide

 

More than two decades have passed since South Africa overhauled a racist regime designed to keep the country’s black population under the thumb of an elite white minority. But while democracy has delivered freedom for all South Africans, not enough has changed for those living in the country’s vast townships. In fact, despite 25 years of democracy, South Africa remains the most economically unequal country in the world, according to the World Bank. If anything, the rainbow nation is even more divided now than it was in 1994. In South Africa, the divide between rich and poor is visible from the sky. On the left is Bloubusrand in Johannesburg, a middle class area with larger houses and pools. On the right is Kya Sands informal settlement. In many ways, the legacy of apartheid endures. Previously disadvantaged South Africans hold fewer assets, have fewer skills, earn lower wages, and are still more likely to be unemployed, a 2018 World Bank report on poverty and inequality in South Africa found. And, at the other end of the spectrum, an elite, mainly white minority continues to thrive. While the African National Congress (ANC) is expected to win again in 8th May national elections, it may be facing an increasingly disillusioned electorate.

Five killed in attack on charitable group in Afghanistan

 Five people were killed and 24 injured in a terrorist attack in Kabul, Afghanistan, on 8th May, authorities said. The Taliban quickly claimed responsibility for the attack, in the aftermath of which four terrorists were also killed, according to the Afghan government. Just before noon local time on 8th May, the attackers detonated an explosive-laden vehicle at the gates of non-governmental organization Counterpart International in the Afghan capital, said Interior Ministry spokesman Nasrat Rahimy. Images following the blast showed a plume of black smoke rising over the city four terrorists were able to enter the organization’s offices before Afghan Special Forces arrived, Rahimy said. During a nearly five-hour battle, all four were killed. Two hundred of the organization’s employees were rescued by Afghan forces. The death toll includes one woman and one Special Forces member. Taliban spokesman Zabiullah Mojahid claimed responsibility for the attack. Counterpart International is headquartered in Arlington, Virginia, and focuses on strengthening civil society and promoting social equality, according to its website. In a statement, the organization said it had worked in Afghanistan for 12 years and never faced a similar attack before. The US has been in on-again, off-again peace talks with the Taliban for months. Yesterday, on May 7, the US Embassy in Kabul published a security alert on its website, advising US citizens that “attacks can occur at any time without warning,” and requesting that travelers avoid large crowds despite an “increased police presence” in the area.

As Europe grapples with Brexit, the African Union seeks a more United States of Africa.

Since the United Kingdom voted for Brexit three years ago, the European Union has been struggling to work out a structure for its future relations with the country. While debates about the unpredictability of economic and political relationships between the EU and Britain continue to linger, thousands of miles away, the African Union (AU) is creating a close-knit relationship among its own 55 member nations. In 2013, the AU designed Agenda 2063, a framework with set objectives to aid the socio-economic transformation of the continent over the next 50 years. The vision is to maintain integration of Africans on the continent, according to Khabele Matlosa, the organization’s Director of political affairs. “The goal is to realize the union of an integrated, prosperous and peaceful Africa driven by its own citizens,” he told CNN. One of the ways the union is doing this is through the proposed launch of a continental passport known as the AU passport. The passport will grant visa-free access to every member state so Africans can move freely across the continent. Presently, only Seychelles and the Republic of Benin have no visa restrictions for Africa travelers.

· Zimbabwean scholar named one of the most inspiring women in the world

A Zimbabwean scholar will be honored with a life-size statue in New York alongside media mogul Oprah Winfrey, Hollywood stars Nicole Kidman, Cate Blanchett, and the pop star Pink for their work championing gender equality. Tererai Trent is among 10 women who have been named most inspiring women in the world. The list includes conservationist Jane Goodall, activist Janet Mock, chemist Tracy Dyson, author Cheryl Strayed and Olympic gymnast Gabby Douglas. All 10 women will have life-size bronze figures unveiled by Statues for Equality in the United States on Women’s Equality Day on August 26.

Trent announced the development on her Twitter handle and said she was “incredibly honored” by the recognition.n”Statues of Equality is set to launch in #NYC this summer. I am incredibly honored to be standing among the World’s Top 10 Most Inspiring Women ‘Sculpted for Equal Rights’! Come August 26 and celebrate the empowerment of women and big dreams!,” she tweeted.

Economy-

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  • Just days after they appeared to be on the verge of brokering a deal, the United States and China are fighting a trade war again.

The Trump administration made good on its threat to raise tariffs on $200 billion worth of Chinese exports from 10% to 25% earlier on 10th May, marking a sharp escalation in tension between the world’s two largest economies. After months of talks aimed at ending a year-long dispute that has already growth and rattled stock markets around the world, the latest US salvo risks triggering a new wave of tit-for-tat responses. Beijing on 10th May expressed “deep regret” at the latest US move, and reiterated that it would “have to take necessary countermeasures.” It did not specify what they would be or when they would be imposed. What happens next could have enormous implications for businesses, consumers and investors. The coming days could be crucial. US and Chinese negotiators ended another round of talks on Friday without a deal to resolve American concerns on market access and intellectual property theft. China is constrained in its response to the latest US tariffs by the fact that it buys far fewer goods from the United States than the other way round. It imposed tariffs on US exports worth about $110 billion when the trade war started last year, leaving only roughly $10 billion worth of goods to target now. “China … is running out of American imports to tax,” said Brock Silvers, managing director at advisory firm Kaiyuan Capital. “The fact that Beijing has yet to declare a specific retaliatory intent shows that China is still hoping the peace process can be salvaged,” he added. The Chinese government could hike the level of its existing tariffs on US products, rather than go after a new list of exports, according to Julian Evans-Pritchard, senior China economist at Capital Economics. “They have a 25% tariff on agricultural commodity imports from the US, they could double that potentially,” he said. “I think it’s a balancing act for them. They want to retaliate for political reasons … but actually in economic terms probably their best option would be to do nothing.” The trade war has already hurt American farmers and some of the biggest companies on both sides. Apple (AAPL) partially blamed the trade war for a revenue decline in the first three months of 2019, and construction company Caterpillar (CAT) said that Chinese tariffs cost it more than $100 million in 2018. Top Chinese firms like Alibaba (BABA) have also warned that the increased tensions are hurting business.

India’s richest man just bought the world’s oldest toy store

India’s richest man just bought Britain’s most iconic toy store chain. Reliance, owned by billionaire Mukesh Ambani, is buying Hamleys from its Chinese owner C Banner International for around £68 million ($88 million). The deal, announced late on 9th May, will give Ambani complete control of Hamleys’ 167 stores in 18 countries. Reliance already owns the rights to the brand in India, where it operates 88 Hamleys franchise stores. Ambani’s purchase will further his push into retail as he prepares to compete with Amazo (AMZN)and Walmar, (WMT)which have poured billions into India as they try to cash in on the fast-growing e-commerce market. “The worldwide acquisition of the iconic Hamleys brand and business places Reliance into the frontline of global retail,” Reliance Brands CEO Darshan Mehta said in a statement, describing it as a “long cherished dream come true.” Ambani is well placed to make a big push into online retail. He has already taken India’s digital economy by storm with his mobile network Reliance Jio, which has signed up more than 300 million users in less than three years since it launched. By purchasing Hamleys — a renowned 259-year-old British retailer whose flagship outlet on London’s Regent Street is also a tourist attraction — Ambani may also be setting himself up to take on rivals way beyond India.

                                     

GLOBAL INDICES AS OF 10th and 11th May 2019

As compared to 3rd and 4th April 2019

 

Global indices as of 10th and 11th May 2019
Name       Current Value Prev.

Close

US MARKETS
 NASDAQ (May 10) 7,916.94 7910.59     
EUROPEAN MARKETS
 FTSE (May 10) 7,203.29 7207.41     
 CAC (May 10) 5,327.44 5313.16     
 DAX (May 10) 12,059.83 11973.92     
ASIAN MARKETS
 SGX NIFTY (May 11) 11,301.00 11283.50     
 NIKKEI 225 (May 10) 21,344.92 21402.13     
 STRAITS TIMES (May 10) 3,273.50 3269.70     
 HANG SENG (May 10) 28,550.24 28311.07     
 TAIWAN WEIGHTED (May 10) 10,712.99 10733.67     
 KOSPI (May 10) 2,108.04 2102.01     
 SET COMPOSITE (May 10) 1,648.69 1646.80     
 JAKARTA COMPOSITE (May 10) 6,209.12 6198.80     
 SHANGHAI COMPOSITE (May 10) 2,939.21 2850.95     

 

 

Global indices as of 3rd and 4th May 2019
Name Current Value Prev.

Close

US MARKETS
 NASDAQ (May 03) 8,164.00 8036.77     
EUROPEAN MARKETS
 FTSE (May 03) 7,380.64 7351.31     
 CAC (May 03) 5,548.84 5538.86     
 DAX (May 03) 12,412.75 12345.42     
ASIAN MARKETS
 NIKKEI 225 (Apr 26) 22,258.73 22307.58     
 STRAITS TIMES (May 03) 3,392.29 3393.33     
 HANG SENG (May 03) 30,081.55 29944.18     
 TAIWAN WEIGHTED (May 03) 11,096.30 11004.49     
 KOSPI (May 03) 2,196.32 2212.75     
 SET COMPOSITE (May 03) 1,679.05 1679.17     
 JAKARTA COMPOSITE (May 03) 6,319.46 6374.42     
 SHANGHAI COMPOSITE (Apr 30) 3,078.34 3062.50     
 SGX NIFTY (May 04) 11,808.00 11760.50

 

Pakistan

Politics

  • Prime Minister Imran Khan on 10th May urged citizens to “stay strong” in the face of rising inflation and promised that the country “will make it through this time”.

The premier was speaking at the groundbreaking ceremony of the Mother and Child Hospital in Rawalpindi. “It is absolutely true that right now, our people are [facing] difficulties. Power is expensive, gas is expensive. I understand that inflation [is rising],” acknowledged Prime Minister Imran. “But what I want you to understand is this: why do prices rise? It is because power and gas sectors are indebted. When our government came to power, debts [of both sectors] had risen to Rs1, 300 billion. You only have two ways [to tackle debt]:  you take more loans — and our power sector is already so indebted that we cannot borrow anymore money — and so we have to raise prices.” He said that the people will have to “live in difficulty” until the government “fixes the system” and repays the country’s debts. Prices of basic commodities have been raised multiple times since the Pakistan Tehreek-i-Insaf came to power. The latest increase in food prices came just before Ramazan. Prices of petroleum products also saw a massive hike last week, causing the price of petrol to increase by Rs9.42 and kerosene by Rs7.46 per litre.

  • Former prime minister Nawaz Sharif — whose six-week bail in the Al-Azizia Steel Mills case expired on 7th May — reached Kot Lakhpat Jail a little after midnight on 8th May after travelling to the prison as part of a convoy comprising hundreds of PML-N supporters and party leaders.

Nawaz had left his Jati Umra residence in Lahore for the jail with a procession of PML-N workers led by Maryam Nawaz around 8:30pm. Although the PML-N supremo was meant to reach the prison before midnight, his motorcade progressed slowly due to the traffic jam caused by the supporters. He eventually reached the jail around 12:15am. A heavy contingent of police was deployed on the road adjoining the jail. “Took us four hours to reach Kotlakhpat from Raiwind which is hardly 30 mins drive Now at the entrance. Thank you Lahore,” tweeted Maryam.

·  Asia Bibi leaves Pakistan following blasphemy acquittal

A Pakistani Christian woman who spent eight years on death row after being found guilty of blasphemy – a conviction that was later overturned – has arrived in Canada, her lawyer said on 8th May. The woman, Asia Bibi, was convicted and sentenced to death in 2010 after being accused, based on little evidence, of speaking against the Prophet Muhammad during a heated argument with Muslim women. She insisted she had not done so and that she was the victim of false accusations prompted by bigotry. Ms Bibi, a former farm worker in her early 50s, was cleared of the charges last year and released from prison under government protection. That led to calls for her execution and violent protests by hard-line Islamists that paralyzed large parts of the country. Her family appealed for asylum in Canada, Britain and the United States, saying that Ms Bibi was in grave danger. Her lawyer briefly left Pakistan, citing threats to his life. The lawyer, Saiful Malook, confirmed through text messages that Ms Bibi had left Pakistan for Canada on 7th May.

·  Bomb near Sufi shrine Data Darbar Lahore kills at least 12

A bomb targeting Pakistani police outside a major Sufi shrine in the city of Lahore on 8th May killed at least 10 people and wounded more than 20, officials said. The blast, a day after the beginning of the Muslim holy month of Ramadan, went off at a police checkpoint near the Data Darbar, one of the largest Muslim shrines in south Asia, which attracts tens of thousands of visitors a year. “Police was the prime target in this attack. We are collecting forensic evidences to ascertain the nature of the blast,” said Ashfaq Khan, deputy inspector general of police operations in Lahore. A police spokesman said the death toll rose to 10, six of them civilians and four police, after a police officer died of his wounds. Officials earlier said eight police had died. At least 23 people were wounded. Muhammad Farooq, a spokesman for the city’s rescue services, said at least seven of the wounded were in critical condition. Police set up checkpoints on main roads leading to the shrine and hospitals were placed on alert, officials said.

  • At least three people, including a tribal leader named Wali Khan Achakzai, were killed in a blast in Killa Abdullah, Levies forces said on 8th May

Tribal Leader Achakzai was returning home from work when the blast occurred, Levies officials said, adding that two of his guards were also killed in the explosion while his car was completely destroyed. It was not immediately clear if it was a targeted attack. The nature of the attack is being determined, Levies officials said.

Economy

 

  • The government borrowed 26 per cent more for budgetary support during the first 10 months of this fiscal year, as compared to same period of 2017-18.

According to the State Bank of Pakistan’s latest data, the government borrowed Rs1, 073 billion during July-April (up to Apr26) as against Rs850bn in corresponding period last year, representing an increase of Rs223bn or 26.2pc. Despite the rise in budgetary borrowing, monetary expansion stood lower than last year, indicating that not sufficient liquidity has been supplied to the economy for better growth. The International Monetary Fund predicts 2.9pc growth rate while the World Bank said estimated.4pc while SBP figures range from 3.5-pc for FY19. The total amount borrowed for budgetary support in 2017-18 amounted to Rs1, 110bn, which is just slightly above the latest 10-month figures.

  • The finance ministry has informed the Senate that of the total $88.19 billion in foreign loans, $9.2 billion will be retired this year.

During the question hour, Minister of State for Finance and Revenue Hammad Azhar said $37 billion worth of foreign loans would be retired during the next five years. Giving details, the minister said some $3,256 million under foreign debt and $1,295.21 million interest on loans had been paid back during the current fiscal year till January 31, 2019. Azhar said, “The previous government, during its five-year tenure, had obtained loans on a very short term.”

  • Newly appointed Federal Board of Revenue (FBR) chairman Shabbar Zaidi on Friday devised a mechanism to freeze bank accounts in case of a dispute, directing authorities against freezing accounts without his prior approval and notice to the account holder.

 

In what was his first order in the capacity of the FBR chairman, Zaidi directed all chief commissioners’ Inland Revenue to inform the account holders 24 hours prior to freezing their accounts if they must do so. “No bank account attachment unless the taxpayer’s chief executive officer or principal officer or owner is informed at least 24 hours prior to attachment and the chairman FBR’s approval is obtained,” read the board’s notification. Talking to reporters today, Zaidi explained that there is already a provision for freezing of a bank account as the last recourse in case of a dispute between the account holder and institutions. “My intention and aim is to document the undocumented economy,” he said, answering a question regarding tax reforms. “The documentation of the undocumented economy will automatically increase the tax base.” “No one can estimate the [volume of] parallel economy. Some people say it amounts to 30 per cent of the economy, some say it is 40pc, my opinion is that it would be more than 30pc.” Earlier in the day, Zaidi addressed officers of the FBR soon after taking charge. The chairman shared his vision to revamp the tax system and machinery and discussed broader problem areas affecting the institution, according to a press release. Zaidi during the meeting stressed the need to shift from manual to a completely automated system to facilitate taxpayers.

  • Pakistan’s talks with the International Monetary Fund (IMF) on a bailout package remained inconclusive on 10th May, dashing expectations that the government was ready to sign on the dotted line.

In a late-night message, the finance ministry said only that “we have made good progress in our discussions with the visiting IMF mission. Consultations will continue over the weekend.” The talks were originally planned for conclusion on 10th May and the IMF mission had confirmed return flights to Washington DC late in the night. Those travel plans have presumably been modified. Both the government team and the IMF staff mission remained evasive and unavailable to the waiting media persons on a day of hectic consultations as they were seen repeatedly coming in and out of the Q-Block, the seat of the ministry of finance and IMF’s resident mission. An informed source said a steep monetary adjustment and fiscal realignments were the key sticking points holding back a final outcome and the IMF had not changed its stance since October last year.     

                                               

F.C Exchange Rates of PKR as of 11th May 2019 as compared to 4th May 2019
Countries PKR rate as of 4th May 2019 PKR rate as of 11thth May 2019
U.S.A. 142.20 142.70
U.K. 184.80 185.30
Euro 158.80 158.80
Japan 1.2800 1.2900
Saudi Arabia 37.80 38.00
U.A.E. 38.75 38.80

 

Pakistan Stock Exchange Indices

As of 10th May 2019 As Compared

To 3rd May 2019  

Position as of 10th May 2019
Symbols KSE100 Index PSX-KMI All Shares Index
Advance 75 (Curr) Current 34716.53 Current 16365.12
Declined High 174 High 34887.64 High 16510.06
Unchanged Low 24 Low 34646.97 Low 16332.65
Total Change 273  -171.11  -144.94

 

 

Position as of 3rd May 2019
Symbols KSE100 Index PSX-KMI All Shares Index
Advance 84 (curr) Current 36122.95 Current 17216.96
Declined High 211 High 36556.42 High 17439.47
Unchanged Low 18 Low 36071.10 Low 17191.70
Total Change 313  -424.68  -222.51

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