Publications Economic & Political Weekly 06th January 2019

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World

Politics-

What will the Middle East look like in 2019?

As we start the tenth year after the onset of the Arab uprisings, there is, sadly, little hope that there will be peace, democratic transition and stability in the Middle East. 2019 will not bring much positive change to the region. Despite the defeat of the Syrian opposition and the retaking of large swaths of land by pro-regime forces in 2018, the Syrian conflict is far from over. More than 40 percent of Syria’s territory is still not under the control of the Damascus government. Despite the ceasefire agreement in the port city of Hodeidah and the progress that was made in the negotiations between the warring parties in Sweden, a final settlement of the four-year conflict is still a distant possibility. Indeed, the weakening position of the Houthis following their loss of territory over the past two years and the enormous pressure the Saudi leadership is facing to stop the war in the aftermath of the murder of Saudi journalist Jamal Khashoggi, may have made Iran, too, is still unwilling to help reach a final settlement.  Despite extensive Kuwaiti mediation efforts and increasing US pressure on Saudi Arabia, there are no indications that the Gulf crisis will be ending any time soon. In early December, Saudi Arabia refused to discuss the crisis at the last GCC summit in Riyadh, to which Qatar sent only a low-level delegation. The four blockading countries (Saudi Arabia, UAE, Bahrain and Egypt) believe that time is on their side and that Qatar will eventually accept their demands.  In 2019, Israel is likely to continue taking unilateral measures to establish new realities on the ground in Palestine

The world in 2019

Brazil began a somber new era on January 1st with the inauguration of its new president, far-right 63-year-old populist provocateur Jair Bolsonaro, an open admirer of torture, military rule and Donald Trump. Globally 2019 is a march into power of an authoritarian populism that is coming to define the politics of this era. It is a current of politics that has also brought us Brexit, whose big moment comes at the end of March, when the UK leaves the EU. The twists and turns on this road are such as to make that outcome impossible to predict with confidence. What is clear is that Theresa May faces an impossible vote this month in the Commons and then all bets are off.

Elected autocrats Viktor Orbán (Hungary), Donald Trump, Abdel Fattah el-Sisi (Egypt), Matteo Salvini (Italy), Rodrigo Duterte (Philippines), Vladimir Putin (Russia), Xi Jinping (China), Recep Tayyip Erdogan (Turkey), Narendra Modi (India) … all share a dangerous contempt for the rule of law and a hatred of the multilateralism. South Africa sees important parliamentary elections this year. India’s Narendra Modi also faces a first serious parliamentary challenge this year.

Other major elections will be held in Argentina, Indonesia and Nigeria, while the Israeli government has also just announced snap elections for early April. At the end of April, 2019 Emperor Akihito will undertake the first abdication by a Japanese monarch in about two centuries.

·Trump threatens use of emergency powers to obtain border wall funding.

After Democratic congressional leaders turned Mr. Trump down at a meeting in the White House situation room, the Republican president threatens to take the controversial step of using emergency powers to build the wall without approval from Congress.

  • US congress member Rashida Tlaib on taking oath learned that her demand to impeach President Donald Trump holds no support from members of her own party i.e. Democrats.

 

Hours after Tlaib was sworn in, she ran afoul of the widespread sense among her colleagues that they all should focus for now on health care and other policies rather than impeachment — at least until special counsel Robert Mueller’s investigation concludes.

  • Floods and blackouts caused by Tropical Storm Pabuk left nearly 30,000 people in evacuation shelters across southern Thailand.

Pabuk, a once in three-decades weather system, packed winds of up to 75 kilometers (45 miles) an hour and brought heavy rains and storm surges as it lashed the entire south of the kingdom in last days of Dec 2018, downing power cables and causing widespread flooding.

·  Fierce protests disrupt Sudanese president’s bid to stem economic crisis.

Short of time to save his sinking economy, Sudan’s president Omar al-Bashir boarded a Russian jet on December 17th and became the first Arab leader to visit Damascus since 2011, renewing what has been seen as a push for the financial help he needs to survive. Events at home soon caught up with him. Two days later, demonstrators angered by bread price rises torched the ruling party headquarters in the city of Atbara, setting off two weeks of protests that quickly spread across the country, with crowds calling on Bashir to step down.

· The massacre that shocked rural America and the huge cost of putting suspects on trial.

After 550 interviews and visits to 10 states, including a 10,000km round-trip to Alaska, criminal investigators in Ohio are closing in on solving one of the most horrendous, perplexing and riveting crimes the American Midwest has seen. On the night of April 22nd, 2016, eight people, including seven members of the Rhoden family, were shot dead as they slept in their homes at four locations in Pike County, a rural district in southern Ohio.

· Bangladesh prime minister wins election amid vote rigging claims.

Prime minister Sheikh Hasina’s alliance won Bangladesh’s election with a thumping majority, the country’s Election Commission said on Monday, giving her a third straight term following a vote that the opposition rejected as rigged. The win consolidated Ms Hasina’s decade-long rule over Bangladesh, where she is credited with improving the economy and promoting development but has also been accused of rampant human rights abuses, a crackdown on the media and suppressing dissent. She denies such charges.

· Philippine cyclone leaves at least 22 dead.

At least 22 people have died due to landslides and flooding triggered by a tropical cyclone that brought heavy rains to central Philippines, a disaster agency official said on 30th Dec 2018. The people, including a three-year-old boy, were reported dead said disaster agency spokesman Edgar Posadas, after a tropical cyclone barreled through the eastern Visayas and Bicol regions.

· Egypt security forces kill 40 suspected militants.

Egyptian security forces have killed 40 suspected militants in three separate incidents in North Sinai and Giza, a day after a deadly bombing on a tourist bus in Giza killing four people. It is not clear whether the suspected militants were connected to attack, but Egypt forces killed 30 people during raids on their hideouts in Giza where it says “terrorist elements” were planning a series of attacks targeting state institutions and the tourism industry.

· New Year’s celebrations light the skies around the world.

The scene is of midnight fireworks over Sydney Harbor during New Year’s Eve celebrations on Dec. 31, 2018.

·NASA rings in New Year with historic flyby of faraway world.

NASA rang in the New Year with a historic flyby of the farthest, and quite possibly the oldest, cosmic body ever explored by humankind — a tiny, distant world called Ultima Thule — in the hopes of learning more about how planets took shape. Offering scientists the first up-close look at an ancient building block of planets, the flyby took place about a billion miles beyond Pluto, which was until now the most faraway world ever visited up close by a spacecraft. Real-time video of the actual flyby was impossible, since it takes more than six hours for a signal sent from Earth to reach the spaceship, and another six hours for the response to arrive.

·  Afghan Taliban says ‘post-occupation’ discussed with Iran.

The Taliban discussed Afghanistan’s “post-occupation situation” with Iran in their latest meeting, the group says, as Tehran makes a more concerted and open push for peace ahead of a possible US drawdown. The remarks came after Iran confirmed on 31 Dec 2018 that the Taliban had visited Tehran for a second round of talks in just a few days that are aimed at ending the 17-year conflict. The Taliban delegation discussed with Iran “the post-occupation situation, restoration of peace and security in Afghanistan and the region”, the militants said in a statement posted on social media and emailed to journalists.

·  Syria rebel-jihadist clashes intensify 50 dead.

Clashes between jihadists and rebels in northwestern Syria have killed almost 50 people over two days, a war monitor said on 2nd January. Clashes flared Tuesday between Al-Qaeda-linked coalition Hayat Tahrir al-Sham (HTS) and an alliance of rebel groups in western Aleppo province. On Wednesday the fighting spread to the neighboring province of Idlib, the country’s last opposition bastion, the Syrian Observatory for Human Rights said. “The fighting intensified and spread to the north and southeast of Idlib province,” said Rami Abdel Rahman, who heads the Britain-based Observatory. He said that 48 people have been killed, updating IST January 2019 toll of 19.

· China lifts ‘mysterious veil’ by landing probe on far side of the moon.

A Chinese space probe successfully touched down on the far side of the moon on 3rd January 2019, China’s space agency said, hailing the event as a historic first and a major achievement for the country’s space program. The Chang’e-4 lunar probe, launched in December, made the “soft landing” at 0226 GMT and transmitted the first-ever “close range” image of the far side of the moon, the China National Space Administration said. The moon is tidally locked to Earth, rotating at the same rate as it orbits our planet, so most of the far side – or “dark side” – is never visible to us. Previous spacecraft have seen the far side, but none has landed on it. The landing “lifted the mysterious veil” of the far side of the moon and “opened a new chapter in human lunar exploration”, the agency said in a statement on its website, which included a wide-angle color picture of a crater from the moon’s surface.

  • The first two Muslim women elected to the United States Congresstook their oaths on the Holy Quran in a televised ceremony on 27th Dec 2018.

Congresswomen Rashida Tlaib and Ilhan Omar, who are of Palestinian and Somali origins respectively, made history as they were sworn into the 116th Congress, becoming the first Muslim women in the 435-member US House of commons. Media outlets have reported that Tlaib, in traditional Palestinian dress, used the 1734 English translation of the holy Quran that belonged to Thomas Jefferson, an American founding father who later served as US president.

· French police clash with protesters as ‘yellow vests’ return to the streets.

Rioters in Paris torched motorbikes and set barricades ablaze on the up market Boulevard Saint-Germaine on 5th January, as “yellow vest” protesters returned to the streets to demonstrate against high living costs and the perceived indifference of President Emmanuel Macron. The latest “yellow vest” street marches began peacefully in the French capital but degenerated in the afternoon as protesters threw missiles at riot police blocking bridges over the Seine River.

·  Three killed and four injured in Los Angeles shooting.

A shooting incident at a California bowling alley has left three men dead and four injured, police said. The Torrance Police Department responded to calls of “shots fired” at the Gable House Bowl shortly before midnight i.e. 5th January.

Economy-

· Fed faces critical time with interest rates and should move to sidelines, Dallas Fed President Kaplan says

The Federal Reserve should take no further action on interest rates for now, in order to gauge the health of the economy and get a better sense of any message being sent by weaker financial markets, said Dallas Fed President Robert Kaplan, on 3rd January 2019. “We shouldn’t be taking further action until some of these uncertainties resolve themselves, and I think that could take several months,” Kaplan said in an interview on Bloomberg Television. The Fed can afford to be patient because inflation “is not running away from us,” he said. …

· The world is on an ‘irreversible path to an economic downturn’: Nomura a US Stock Broker.

The stock market is expected to rebound in 2019, but 2020 could be a much different story. That’s the assessment from Nomura strategist Naka Matsuzawa in a December 28 note to clients. “The global economy is already on an irreversible path to an economic downturn,” he wrote. “We do not expect the economy to fall suddenly into a downturn, but to recover temporarily in the second half of 2019 to the first half of 2020 after signs of a slowdown strengthen through the first half of 2019.” Matsuzawa sees a few market tailwinds in 2019: easing U.S./China trade conflict; stimulus for China’s economy; resumption of corporate acquisitions and CAPEX spending; and consumer strength from the slump in oil prices. This is in the context of Nomura’s argument that a credit cycle typically lasts 10 years. Since the financial crisis occurred 10 years ago, we are nearing the end of the current cycle.

  • OPEC oil supply fell in December 2018 by the largest amount in almost two years, a Reuter’s survey found, as top exporter Saudi Arabia made an early start to a supply-limiting accord while Iran and Libya posted involuntary declines.

The 15-member Organization of the Petroleum Exporting Countries (OPEC) pumped 32.68 million barrels per day last month, the survey on Thursday found, down 460,000 bpd from November and the largest month-on-month drop since January 2017. The survey suggests Saudi Arabia and some of its allies acted unilaterally to bolster the market as crude prices slid on the possibility of a new glut. A formal accord by OPEC and its allies to cut supply in 2019 took effect only on Tuesday. Oil has slid to $56 a barrel from a four-year high of $86 in October on signs of excess supply. While OPEC has not ruled out further action, officials hope prices will be supported by further output declines in January as producers implement the new deal. “Naturally, it will adjust from now on,” said an OPEC delegate, referring to the downward trend in production. “I hope the market will recover soon.” OPEC, Russia and other non-members, an alliance known as OPEC Plus, agreed in December to reduce supply by 1.2m bpd in 2019. OPEC’s share of that cut is 800,000 bpd.

  • China’s central bank said on 4th January that it was cutting the amount of cash that banks must hold as reserves for the fifth time in the past year – freeing up $116 billion for new lending as it tries to reduce the risk of a sharper economic slowdown.

The moves will free up a net 800 billion yuan ($116.51 billion) after banks use some of the 1.5 trillion yuan in liquidity released into the financial system to pay back maturing medium-term loans. “Policy easing will be stepped up further over coming months,” Capital Economics said in a research note.

 

  • Global indices as of 4th January 2019 as compared to Dec 28, 2018.

 

Global indices as on 4th January 2019
Name Current Value Change Prev.Close
US MARKETS
 NASDAQ (Jan 04) 6,738.86 275.36 6463.50
EUROPEAN MARKETS
 FTSE (Jan 04) 6,837.42 144.76 6692.66
 CAC (Jan 04) 4,737.12 125.63 4611.49
 DAX (Jan 04) 10,767.69 351.03 10416.66
ASIAN MARKETS
 NIKKEI 225 (Jan 04) 19,561.96 -452.81 20014.77
 STRAITS TIMES (Jan 04) 3,059.23 46.35 3012.88
 HANG SENG (Jan 04) 25,626.03 561.67 25064.36
 TAIWAN WEIGHTED (Jan 04) 9,382.51 -109.91 9492.42
 KOSPI (Jan 04) 2,010.25 16.55 1993.70
 SET COMPOSITE (Jan 04) 1,575.13 15.10 1560.03
 JAKARTA COMPOSITE (Jan 04) 6,274.54 53.53 6221.01
 SHANGHAI COMPOSITE (Jan 04) 2,514.87 50.51 2464.36
 SGX NIFTY (Jan 05) 10,887.00       

108.50
                10778.50

 

Global indices as on 28th Dec 2018
Name Current Value Change
US MARKETS
 NASDAQ (Dec 28) 6,584.52 5.03     
EUROPEAN MARKETS
 FTSE (Dec 28) 6,733.97 149.29     
 CAC (Dec 28) 4,678.74 80.13     
 DAX (Dec 28) 10,558.96 177.45     
ASIAN MARKETS
 NIKKEI 225 (Dec 28) 20,014.77 -62.85     
 STRAITS TIMES (Dec 28) 3,053.43 8.69     
 HANG SENG (Dec 28) 25,504.20 25.32     
 TAIWAN WEIGHTED (Dec 28) 9,727.41 85.85     
 KOSPI (Dec 28) 2,041.04 12.60     
 SET COMPOSITE (Dec 28) 1,563.88 15.51     
 JAKARTA COMPOSITE (Dec 28) 6,194.50 3.86     
 SHANGHAI COMPOSITE (Dec 28) 2,493.90 10.81     
 SGX NIFTY (Dec 29) 10,950.50 29.00

 

Pakistan

Politics

  • The military on 4t January 2019 announced that it has inducted an indigenously developed A-100 rocket as part of its Multiple Launch Rocket System of the artillery corps.

“With a range of over 100 kilometers, the rocket is a highly effective and potent interdiction that can effectively disrupt [the] enemy’s mobilization and assembly,” read a statement issued by the Inter-Services Public Relations (ISPR). According to the ISPR, a ceremony was held to mark the induction with Army Chief General Qamar Javed Bajwa as the chief guest.

 

  • The Federal Investigation Agency (FIA) on last days of Dec 2018 has launched operation against 726 Muttahida Qaumi Movement-Pakistan (MQM-P) workers allegedly involved in money laundering.

According to details, at least 726 MQM members are accused of depositing an amount of Rs1 billion in Khidmat-e-Khalq Foundations with different names. Meanwhile, the National Accountability Bureau (NAB) has tightened the noose around Muttahida Qaumi Movement-Pakistan (MQM-P) senior leader Farooq Sattar, alleging him of fake appointments during 2008-2010. Over two dozen properties owned by the Khidmat-i-Khalq Foundation (KKF) of the Muttahida Quami Movement (MQM) have also been confiscated in Karachi by the Federal Investigation Agency (FIA).

  • Prime Minister Imran Khan met with Turkish President Recep Tayyip Erdogan at the Presidential Palace in Ankara on 4t January 2019 during his first official two-day visit to Turkey.

The leaders discussed enhancing of relations and strengthening of economic ties between Pakistan and Turkey.

  • The Supreme Court has disposed of a petition seeking the reopening of the National Reconciliation Ordinance (NRO)case against PPP co-chairperson Asif Ali Zardari, former president retired General Pervez Musharraf and former attorney general Malik Mohammad Qayyum.

In July 2018, the apex court had taken up the petition of Advocate Feroz Shah Gilani, the president of Lawyers’ Foundation for Justice, seeking recovery of huge amounts of public money wasted against the backdrop of the NRO in 2007 allegedly by the aforementioned trio. In November 2018, the court had asked the petitioner to provide evidence with written arguments to convince the bench on the maintainability of his petition. At the outset of the hearing today, the chief justice noted that “Asif Zardari, Pervez Musharraf and Malik Qayyum’s asset details have arrived”.

  • The Supreme Court has declared null and void all agreements between the Defense Housing Authority (DHA) and the Eden Housing Society, and ordered the former to develop the “11,000 plots sold by the latter within five years” in a bid to offer affectees some relief.

 

The court further indicated that an implementation bench could be formed to resolve the case, and instructed all suspects currently in the National Accountability Bureau’s (NAB) custody in connection with the case to contact the relevant forums. A three-member bench of the apex court, under Chief Justice of Pakistan Mian Saqib Nisar’s stewardship, issued the orders while hearing the case in Islamabad.

  • Prime Minister Imran Khan with the dawn of a new year has resolved to battle poverty, illiteracy, injustice and corruption in the country in 2019.

In a tweet on Jan 1, the prime minister declared that his government would “wage jihad against the four ills of our country: poverty, illiteracy, injustice and corruption.”

· Infamous For Police Encounters Rao Anwar Retired. 

Former SSP Rao Anwar retired on the first day of 2019, Monday, after serving 37 years in Sind police department. He was infamous as a specialist of police encounter and he is being faced murder of Naqeebullah in an alleged police encounter.

  

  • Pakistan Muslim League-Nawaz (PML-N) leader Rana Sanaullah on 4th January said that he has filed a reference to disqualify Railways Minister Sheikh Rashid from keeping any public office.

The former Punjab law minister, in a video message on social media, hit out at the Awami Muslim League (AML) chief, saying he was nothing but a fraud, who had damaged the Kashmir cause. “He is a fraud, who has kept himself under wraps … his true identity will be revealed in a medical examination,” he remarked. Sanaullah said he was sending the disqualification reference against Rashid to the National Assembly speaker so that he can forward it to the Election Commission of Pakistan (ECP). He claimed the railways minister had established a ‘fake’ training camp in the name of Kashmir cause. “In reality, he himself is the real owner of the benami (anonymous) property,” he added.

  • Major (retd) Geoffrey Douglas Langlands, a former British Army official and an educationist, who served Pakistan since the partition in 1947, died at the age of 101 in Lahore on 2nd January.

Carey Schofield, who took over as Principal of the Langland’s School and College in Chitral after him, says he will be very sadly missed. “He loved the country and it was his decision to stay on after 1947” for serving different colleges, Cadet Colleges and Universities in far flung areas. Imran Khan has also remained one of his students.

  • Gunmen attacked a security forces’ training base in the restive southwestern Pakistani province of Baluchistan on IST January.

This resulted in setting off a gun battle in which at least four members of the security forces and four attackers were killed, officials said. 

A man was shot dead while three others received injuries during a violent clash between two religious groups on 5th January night over the possession of a mosque in Mehmoodabad area of Karachi.

Police says that the mosque was given under the administrative control of one sect when members of a ‘perceived’ rival sect attacked it. DIG east says that the mosque was handed over to a Deobandi group under court orders. “The transition occurred smoothly in the day but at night, at around 11 pm, around 150-200 men from Sunni Tehreek and Tehreek-i-Labbaik Pakistan (TLP) attacked the men present inside the mosque,” said the senior officer.

 

Economy –

  • Political headwinds are growing in Pakistan, warns Fitch Solutions.

“The government will struggle to deliver results given growing downside risks to policy-making stemming from a growing opposition and rising influence of religious hardliners, as well as deteriorating foreign relations with the west,” says the report. The government would need to deliver tangible economic improvement if its still-high popularity is to continue through the parliamentary term,” the authors state. Moreover, investor confidence has declined significantly in the past six months mainly due to the economic mismanagement of the government visible in the ad hoc mini-budgets, energy crisis affecting the industry, exchange rate volatility and high interest rates.

Going forward, “a united opposition poses downside risks to policy-making and enactment in the country” since the PTI does not have a “simple majority in the national assembly” and is “reliant on smaller parties to form the majority coalition partners [who] could leverage a stronger opposition to gain political concessions,” warns the report.

 

  • The central bank has printed new currency notes worth over Rs1 trillion to finance government expenditure, but a notable part of the banknotes is fueling the parallel economy due to higher taxes on cash withdrawal from banks.

The State Bank of Pakistan (SBP) reported on 4th January that it had lent Rs1.43 trillion to the Federal government in the past six months (July-December 2018). Government borrowing from the central bank shot up five times to Rs1.43 trillion in Jul-Dec 2018 compared to Rs288.09 billion in the same period last year, according to the SBP.

  • Prime Minister Imran Khan while expressing satisfaction over growing Turkish investments in Pakistan stressed the need for transforming the brotherly bilateral ties into a vibrant economic partnership. He also said that in fact socialist mindset has destroyed economy of Pakistan.

“South Korea and Malaysia learnt from Pakistan and both moved ahead,” he said, adding Pakistan deviated because a socialist mindset pervaded that became a deterrent to wealth creation as profit-making was considered a sin. “This mindset sent the country back and nationalization took place which forced big businessmen and industrialists to go abroad,” the premier lamented, adding the socialist mindset existed in the bureaucracy, who had envy against those making wealth. He also told participants that the government believed wealth creation could take the country out of the economic crisis, make it repay debts and steer the people out of poverty. “To take people out of poverty, we have to allow people to make money. The more money is made, the more wealth is created, the more we have the ability to raise taxes… We can use that money on the bottom tier of our society,” the prime minister said.

 

F.C Exchange Rates of PKR as of 5th January 2019
Countries PKR rate as of 28th Dec 2018 PKR rate as of 5th January 2019
U.S.A. 139.20 139.20
U.K. 176.00 175.40
Euro 158.30 158.10
Japan 1.2500 1.3000
Saudi Arabia 36.90 37.00
U.A.E. 38.00 37.90

 

Pakistan Stock Exchange Indices as of 4th January 2019

Stocks closed with the KSE-100 index clawing up by mere 5.48 points (0.01 per cent) and close at 37,547.49.

Participation remained thin with the traded volume at 64m shares, representing the lowest volume in six months. The index drifted aimlessly between the intraday high of 273 and low by 67 points in choppy trade.

Foreign investors kept to the sidelines with net sale of $0.09 million. Investors’ disinterest in trading stemmed from lack of positive triggers and concerns over the upcoming supplementary budget and the outcome of negotiations with the International Monetary Fund. In an uncertain scenario, investors were not generally inclined to carry positions over the weekend.

 Position as of 4th January 2019

 

Symbols                                                                                                KSE100                    PSX-KMI
Advanced (Curr.) 135
37547.49
18252.73
Declined (High) 136
37815.19
18387.81
Unchanged (Low) 28
37474.66
18214.95
Total (Change) 299
                                 5.48
9.22
 

 

Position as of 28th Dec 2018

 

Symbols                                                          KSE100                        PSX-KMI
Advanced (Curr.) 90
37167.02
18182.39
Declined (High) 209
37891.19
18606.20
Unchanged (Low) 14
36918.66
18039.76
Total (Change) 313
-686.55
-327.85

 

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