All posts by : Muhammad Ammar Alam

The outbreak of Coronavirus in the Chinese city of Wuhan, which has already killed more than 200 people in the country while affecting 9000 others, poses significant repercussions for states with Chinese engagements. This is particularly true for Pakistan that hosts thousands of Chinese workers and engineers working on projects affiliated to the China-Pakistan Economic Corridor (CPEC). Reports confirm that the Virus, which shares similarity with SARS (Severe Acute Respiratory Syndrome) that killed hundreds of people in China in 2002 and 2003, has found its victims in the Middle East, Southeast Asia, Far East, and North America. Being in proximity to China and a greater people exchange ratio, Pakistan stands at high risk from the Coronavirus. Also, the outbreaks leave a deeper impact on China’s relations with its neighbors and major trading partners, that too in an environment where conspiracy theories make the dynamics of the situation even more uncertain. Global Implications and Major Partners The Wuhan’s Coronavirus has already strumbled the world’s economic market with stocks falling sharply. The outbreak of the Virus comes at a time when China has shortly suffered from slow economic growth and an intense trade war with the US. With Samsung losing its weight and Google closing its offices, the economic impact is swelling across the region and the world at large. The Coronavirus outbreak has put the international market on lockdown while the Chinese mark it the deadliest day after the World Health Organization (WHO) declares Global Emergency. The purpose of the report is to outline major global strategic implications of the outbreak and hence give insight into the possible worst-case scenarios. Analyzing the anticipated moves and policies of the major strategic and trading partners is important because of the high frequency of people exchange and those of goods and services. For example, Russia touches almost 2, 615 miles of an international border, has closed the border crossings with China because of the possible infiltration of the virus. The US, which has just secured favorable US-China Phase one Deal requires China to ramp up purchases up to USD 200 billion US’ agricultural and manufactured goods, is at the receiving end of strategic and economic implications.  The fallout is even bigger to worry about, especially at a time when the US is on serious low with Iran over Qasim Sulaimani and 2015 Nuclear Deal, Trump’s renewed push for more tariffs, clouds of a trade war with Europe and row with Britain over its decision to allow Chinese Huawei 5G network installation. India being a major trade partner and in proximate geographical length continues to evacuate citizens and halts direct flights on major routes as did many other countries. Conspiracy Theories about Coronavirus With the debates going on the Virus, misinformation, and conspiracy theories run in parallel on print, electronic, and social media about the means and ends of the Coronavirus. The theories are dangerous, strange while some others are racist in its expressions making the situation more uncertain in understanding the origin and end of the virus. For example, Twitter handles pushes for Bill Gates Theory which saying that the Virus is owned by Bill Gates Foundation and used by the ‘Deep State’ since “to create chaos since nothing is stopping Donald Trump”. Similarly, the QAnon is a popular conspiracy theory that mentions Donald Trump asks for using Miracle Mineral Solution (MMS), bleach, to protect against Coronavirus. Moreover, the viral racist theory in Australian speaks of Asian food as the reason behind the spread of the virus while Canadian Lab Theory claims that it was a Chinese scientist working at Canada’s National Microbiology Lab (CNML) that took back the Virus to China and hence spread there in Wuhan. Apart from this, some twitter handles spread the conspiracy theory stating that the Chinese government developed the Virus for warfare purposes which they link with the Chinese Scientist in CNML taking the Virus to security lab in Wuhan where it accidentally hit the public. Implications for Pakistan However, for Pakistan, the virus’s outbreak will impact the flagship project CPEC in two ways. Firstly, the inflow of the Chinese will reduce to a significant number after tough screening tests both on departure and arrival to Pakistan. Such a reduction of exchange will be of global nature which will cause the second impairment to the Chinese potential in continuing work on the CPEC projects. Secondly, the Chinese economic and political capital will be diverted towards the prevention of the Virus at home and surviving its market collapse. The previous SARS virus cost China almost USD 12.3 to USD 28.4 Billion which could be even severe at a time when China is experiencing slow economic growth and engaged in a trade war with the US. The economic pressures from the disaster will hamper continuous Chinese engagement in the CPEC projects. Moreover, since most of the foreign tourists visiting Pakistan are from China, the reduction in this inflow will slightly put in pressure Pakistan’s tourist industry. In immediate response to the crisis, Pakistan’s Ministry of Health Services, Regulation and Coordination has called for a higher degree of caution and took measures to mitigate possible threats posed from the Virus. At a time when Pakistan is considered as the ‘Dark Horse’ and top on the Chinese priority for tourism and entrepreneurial opportunities, estimates suggest that around 95, 000 Chinese have visited the country in the last five years. Given the intense inflow of Chinese nationals and fear of an outbreak of Coronavirus in the country, authorities in Pakistan have directed to conduct screening at major airports while strict monitoring mechanism will be installed to keep a check on seaports and Pak-China border on individuals carrying the Virus. Pakistan’s Civil Aviation Authorities (PCAA) has made mandatory measures of thermal screening for passengers leaving China for Pakistan. For this purpose, Quarantine rooms have been set up at the airports. Apart from this, the Chinese are reportedly sharing health information with Pakistan on possible prevention of the Virus. The three camps set up for

The limited degree of automatic coverage for workers and businesses drives a focus on emergency support-of-wage bills for companies and direct transfers to individuals. More companies will fail in such economies. The crisis has severely affected many emerging-market economies and the countries will need to be innovative and highly targeted with limited funding. The countries have large informal sectors and limited resources, which has led to more modest relief and stimulus packages. These countries face a funding gap: their central banks have limited “headroom” to intervene, and they have lower debt resilience because of higher debt-to-GDP ratios and higher costs of debt. The global scan of countries’ approaches to delivery suggests that there are three crucial success factors. The first is to scale up social-support infrastructure. Countries without sufficient infrastructure need to create innovative disbursement channels rapidly. A second key success factor for delivery is to strengthen digital delivery. Real-time tracking is critical to enable effective delivery. Lastly, it is critical that governments design interventions in a way that accelerates delivery. Furthermore, the stimulus will only be effective if individuals and businesses spend, rather than save, what they receive. These trying times have tested the best of the best. These challenges will initiate a new trajectory of work ethic and technological applications the world over.

Currently, the COVID-19 crisis is the worst health emergency the world is witnessing. The worst toll it has taken is on the economy. The US Governments’s economic response has been unprecedented as it announced a $10 trillion relief package and so have other countries. The stimulus package has taken different forms: guarantees, loans, value transfers to companies, deferrals, and equity investments. The stimulus actions taken by countries show a significant variation in the size of the response. Monetary-policy measures were the first-line response as liquidity injections were made. Turning to household measures, the immediate relief was for the most vulnerable, especially in countries without automatic stabilizers already in place. Some countries enacted broader income-distribution programs, primarily to support workers in the informal sector and the self-employed. Some governments had taken steps aimed at longer-term resilience for individuals, such as jobs redeployment and reskilling. SME sector was helped through debt restructuring. The three factors that seem to have shaped how economies responded to Covid-19 crises are: 1) Degree of outbreak and intensity of lockdown 2) Preexisting social- and business-support measures already in place 3) Structure of the economy. The combination of those three factors gives rise to three response archetypes: coordinated-, liberal-, and emerging-market economies. The archetypes provide guidance on the constraints and policy options available. Countries with coordinated-market economies have leveraged strong balance sheets and existing measures to respond rapidly and at scale to protect businesses and jobs, but they must shift to longer-term measures and beware of future stagnation. Often, such countries already have initiatives in place to assist vulnerable households. Their responses are swift, large, and aimed at shoring up business through loan guarantees, equity injections. The countries will still need to ensure that companies are encouraged to invest in strategic priorities I.e. R&D, energy efficiency, reskilling, etc. to maintain competitiveness and “future proof” their economies. Countries with liberal-market economies face greater short-term risks but have greater flexibility for long-term dynamism. Their economies skew more heavily toward big corporations.

With lockdowns easing in most countries of the world it was expected that demand for fuel would start roaring again. However, that was not how things turned out. Last weekend, OPEC+ countries agreed on cutting outputs to stabilize the dramatic slide in prices. This deal was supposed to keep the oil from flooding the market until the demand was returned to its normal levels. Even with the rebalancing of supply and demand, the consumption has not picked up as much as the bulls had hoped. The fizzling out of the euphoria in the first week of June has put a dent on the hopes of many. All these events are a consequence of the fears of the second wave of infections across the globe. Even though, slowly people are going back to their old lives the fear remains. This fear is what is halting the prices and consumption. According to experts, the demand shows this month have been 4.5 million barrels per day which is twice the loss of last month. Similarly, the recovery witnessed at the end of April has fizzled out as well bringing deliveries of all kinds of fuels to 20 percent lower than expected. The shunned public transportation system has caused a downslide in gasoline prices despite a surge in consumption by individuals. Fuels for airplanes are still down by 60 percent which is the biggest loss this industry has seen. Moreover, the drop in distillate fuel is still getting bigger. While some fights across the globe are being reactivated, full border openings are still pending which is causing the downslide in fuel demand and pricing levels. The future of the oil demand looks bleak until a full-fledge solution is implemented in the long run. Until then this topsy turvy trajectory of fuel demand will be manifested across the globe with numerous trickle-down losses for almost all industries.

The environmental performance index (EPI) scorecard is calculated every year to analyze the performance of different countries in adhering to UN Sustainable Development Goals (SDGs) on the ecological paradigm. The study is comprehensively conducted by Yale and Columbia universities. This year’s review places Bangladesh on the 162 nd position out of 180 nations. The main purpose of this exercise is to help determine where a particular country stands concerning its environmental policies and what remedies can be taken by them to improve their rankings in the wider scheme of things. The particular assessment is based on 32 performance indicators that are spread across 11 categories, namely; ecosystem, environmental health, climate change, ecosystem vitality, pollution level, and fisheries. The best-performing nations are known as leaders, whereas the ones which are lagging are called laggards. Last year Bangladesh was ranked 179th, keeping this in mind, this year marks a considerable improvement for the nation. In South Asia as well, the country has moved upwards, attaining the third position with 29 points after India and Afghanistan respectively in the region. However, Bangladesh still has a long way to go before placing next to the top tier countries of the world. For this, she has to apply the best practices that are being applied around the globe. Upon closer scrutiny towards the EPI scoreboard, it is obvious that developing countries with high per GDP capita are leading, be it; Denmark, Luxembourg, Switzerland, and The United Kingdom. These countries owe their success to their ability to invest more financially and a better governance model. On the contrary, Bangladesh should look to chalk out a model that suits its environment and culture. It should factor in the high levels of pollution in the air, rapid urbanization, and high population density. To counter these Bangladesh needs to benefit from its demographic dispensation. Finally, the present assessment is based on indicators that reveal a lot about the country’s present performance and what needs to be done in addressing its environmental concerns. Another aspect that should be taken into consideration is how developing nations can the other nations in bringing their levels to adequate measures to be in a better position for next year’s calculations.

There are two important components of an economic response to this pandemic outbreak. The first is building infrastructures like hospital facilities and quarantine facilities, preparing the staff to deal with the SOPs and procuring equipment. The second component is to adopt policies that help mitigate the economic repercussions of social distancing. This report will highlight the economic responses of the Big Four South Asian Countries using data from IMF Covid-19 Tracker. Economic Response by Bangladesh: Firstly, the economic response by Bangladesh included modest expenditure on both economic and health care sides. Currently, the country is allocating 0.008% of its GDP on health care services and facilities. Moreover,  approximately 0.34% of the GDP (87.4 billion takas) mad the total stimulus package given by the country. Economic Response by India: Interestingly, India’s economic response has been to increase expenditure on the health care side as well. For the state and union territories to build healthcare infrastructure, the government has allocated a budget of 150 billion rupees. This translates to 0.1% of the country’s total GDP. In addition to this, for more funds to fight the pandemic, the government has set up a fund called PM-CARES. From this fund, 2000 crore rupees have been earmarked to spend on ventilators and other health care facilities. However, critics have widely criticized the transparency in its functions. Also, in terms of economic expenditures, two small stimulus packages have been announced. The main elements included in the stimulus package are cash transfers, in-kind transfers for food and amenities, insurance coverage for workers, credit to support micro, medium and small enterprises, and wage support for daily wage workers. In total the fiscal stimulus provided by the government is a meager 01.3% of the GDP. Similarly, the figures that were announced by the Prime Minister i.e. 10% of GDP of fiscal stimulus comes from different sources. Similarly, the announcement included elements like Reserve Bank’s injections of liquidity which does not form a part of the fiscal policy. Both stimulus packages just renamed the existing budgeted allocations. Accordingly, the second package in particular was useful for the medium run only and will have no significant effect on the aggregate demand in the economy. The critics are of the point of view that despite the adverse situations of migrant workers, there have been no measures taken for relieving them of their misery. Economic Response by Pakistan: Furthermore, in Pakistan, the health side expenditure is a little lower than in India. The amount earmarked for purchasing equipment and other health care facilities is 25 billion PKR which translates to 0.07%of the GDP. This budget eliminated the import duties on health and medical equipment. Consequently, Pakistan sees the most positive economic responses by Big Four South Asian Countries. The relief package announced was worth 1.2 trillion PKR which can be valued at 3.34% of the country’s GDP. This expenditure is earmarked for cash transfers, relief for the daily wager, procurement of wheat, relief in the procurement of fuel, and food supplies. Economic Response by Sri Lanka: Additionally, the health care expenditure of the country is comparable to Pakistan and India. The government of Sri Lanka has allocated up to 0.1% of the GDP. Moreover, the expenditure on the economic side has been very low. cash transfers for the poor amounted to 0.1% of the GDP. supporting measures include concessional loans, food allowances, and extension of tax payment deadlines. Thus, only Pakistan set the largest expenditure on the economic side for fighting the pandemic. In addition to this, all four countries have comparable spending expenditure on the health care side. Conclusively, according to this report, we can see what the economic responses of the Big Four South Asian Countries have been to the pandemic.

If we take a look at the budget of Pakistan and the predictions for the Pakistani economy for 2020 – 2021. We can see that like all the other countries of the world, Pakistan will also face some economic challenges during these trying times. According to estimates, the world economy as a whole will shrink by 20-30% for one year.  This is the sharpest economic decline the globe has ever faced. In this shrinking Pakistan’s economy will shrink the most it has in decades and the fiscal deficit will grow by 9.4% of the GDP. The economic policymakers of the country in announcing the budget for 2020-2021 missed many of the economic targets they should have addressed by a very wide margin. The Pakistani economy is expected to shrink by 0.4%. This is a major setback for the economy as a whole. Instead of going on the trajectory of growth with an expected 3.3%. The Budget 2020-21 and the Pakistani economy show that contraction is going to be the deepest the Pakistani economy has witnessed in decades. Since this has never happened before the economic repercussions and the trickledown effect is unknown as yet. Moreover, the IMF stabilization plan is also putting a lot of pressure on the economy. Covid-19 has hit economies all over the world very hard. These times will try all economies of the world but mostly those that fall in the underdeveloped or developing category. In some extreme cases, the developed as well. It will take a considerable amount of time for the economy to re-stabilize itself. This is because pandemic or not the economy takes a significant amount of time to stabilize and show the effects of any stimulus. However, let us hope that the Budget 2020-21 and the Pakistani Economy both are a step in the right direction.

The clash between India and China last week was the worst in the last 45 years. India’s economic realities of a war with China could lead to devastating economic repercussions for both countries. Economic ties between the two countries stand at around 86 billion dollars. With China India’s second-largest trade partner and Chinese imports at present stand at 70.3 billion dollars. From social media, telecom, mobile industry, startups to pharma industry Chinese firms run deep into the Indian economy. Beijing has up till now grabbed around three- fourths of New Delhi’s mobile industry and supplied over 75% of its power sector equipment. India’s bulk drug industry and intermediaries of around 68% come directly from China. India’s economic realities of war with China Moreover, Chinese investors have invested more than 4 billion dollars in the Indian startup industry with 18 of India’s 30 unicorns (A unicorn is a privately held startup company valued at over $1 billion) are Chinese-funded. Another strategic advantage that China holds is her consumption-based growing domestic market. Many speculate that in 2020 China will become the largest consumer market in the world with consumption standing at 5 trillion dollars. It has leapfrogged its consumption capacities in many consumer categories. With more than a billion consumers, surely China remains one of the top destinations for global MNCs to invest. Hence, New Delhi will find a hard time boycotting Beijing economically. China supplies crucial inputs for many important sectors in India. A small example may include that almost 70% of all APIs in the pharma industry for India come from China. A minute disruption in the supply chain would cause a loss of around 39 billion dollars to the Indian pharma industry. India directly imports around 27% of the components from China directly. Another pertinent example is the auto industry, where  In the electronic industry. India’s dependence on China is as high as 43%, meanwhile, in the garments and textile industry, the dependence stands at 27%. Moreover, China supplies 78% of solar equipment to India. Which in turn has increased her capacity from 3000 MW in 2015 to 38000 MW? Further,  the cost to produce has also been reduced to RS3 from RS 7 in 2015. Conclusion Hence, shifting these supply chains towards other ASEAN countries may not help. As other countries may start to import more from China to fulfill India’s growing demand. Thus, a real economic war with China would cause havoc to the Indian economy at large. Conclusively, starting a war on the economic front may seem profitable only for the peanut gallery audience.