Muhammad Ammar Alam, a graduate of the School of Economics, Quaid-e-Azam University Islamabad, specializes in political and development economics.

The outbreak of Coronavirus and its Implications

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

Read More »
The response of countries to Covid-19
Earth Eco
Muhammad Ammar Alam

The response of countries to Covid-19

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.

Read More »
The Bulls and Bears Of Oil Demand
Market Muse
Muhammad Ammar Alam

The Bulls and Bears Of Oil Demand

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.

Read More »
Extending Lockdowns An Economic Cost
Uncategorized
Muhammad Ammar Alam

Extending Lockdowns An Economic Cost

The extension of the lockdown by the government has severe repercussions for the economy as it would deteriorate India’s GDP forecast for FY2020, to a contraction of 2 percent. These estimates will be achieved on the assumption that the lockdown will extend till mid-July and thereby, the engine of the economy will restart by August. RBI also expects a gloomy picture and has pegged the contraction as high as 5 percent. Strict lockdown in COVID-19-affected parts of the economy continues while some parts have reopened. The government has extended the nationwide lockdown to June 30, 2020. The estimates for the economy get bleaker with each passing phase. If no vaccine is made by the time the deadline lapses, the government will continue with the semi-lockdown phase. Analysts have recommended higher fiscal spending as the need of the hour. The wider fiscal deficit will also be a result of lower tax collections this year. Though there are concerns of a wider gap, the analysts justified it with growth trending a full 9 percentage point below the potential. The government will fund the deficit through a USD 13.3 billion increase in OMOs to USD 88.5 billion. Also See: The response of countries to Covid-19

Read More »
Economic Responses of the Big Four South Asian Countries
Market Muse
Muhammad Ammar Alam

Economic Responses of the Big Four South Asian Countries

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.

Read More »
Shopping Basket