Pakistan Saved $10 Billions

[Path-Finder]

https://tribune.com.pk/story/149697...never-operated-pakistan-says-chinese-diplomat

Days after Punjab Chief Minister Shehbaz Sharif denied any irregularities in the execution of Multan Metro Bus Project, a Chinese diplomat has clarified that the Chinese company allegedly involved in the 'scam' did not operate in Pakistan

Aram hai abb ,do study some thing before quoting

and I will believe you!! you educating cranny.

 

[Jungibaaz]

I would ask politely that you address the points I made as opposed to reading in to what I did not say and use that as a rebuttal. Nowhere did I defend PMLN’s record on fiscal or trade management. The current economic crises minus covid, were largely created during their tenure.

In fact, the very first point you made below I was making before the 2018 election. I remember seeing IMF reports in 2016 pointing to the obvious, PKR was overvalued. PKR overvaluation and trade imbalance was contributing to consumer growth and lower inflation levels, but it was unsustainable. I was one of the only members here that I’m aware of that was pointing out that using SBP reserves to keep PKR overvalued would result in another crisis and another IMF bailout. I can’t find that post at this time.

I even said before the 2018 election that the economic situation that had been created in recent years will cause us to suffer what we are suffering now. Even now you’ll see me in other threads saying it’s not IK’s fault that the economy has fallen flat, it was set to crash given the course made roughly 2015-2017, by 2018 the writing was on the wall for anyone that has any economic knowledge.

So instead of making this partisan, I’d invite you to look what I am actually saying and address what is said, than reaching for PMLN tenure to argue against points I didn’t make, by furthermore using criticism of that government that I myself made while most people here were oblivious.

If you want to see evidence that of my thoughts on this subject, you can see some examples here, here, and here.

Keeping the dollar stable using the Fx reserves is not a good policy. Its only good, if you are planning on importing machinery to improve the local industry, and in turn improve the exports. However, most of the things that were imported were finished goods. Very few machinery or raw materials benefited from it. Why import a machiney to produce good, when you can just buy the finished goods, and resell them. The price of dollar is not rising that much. The market was flooded with cheaper imported goods, which meant local ones could not compete. No money was spent on improving/helping them. That resulted in our local industries shutting down. We were importing vegetable, when our country can easily grow them if govt helps outs.

If you check now, the things that were stopped from importing were not essential goods. Only things that had a local alternative were banned/taxed high. Raw material is still being imported. Cotton will be imported as well, because our local cotton production can't meet the demand. Govt has announced custom/tax relief for importing raw materials. All these relief are now given to local industry, instead just all across the board. The reduction that you are seeing in imports is mainly unnecessary imports, which now have a local alternative available.

Today financial institutes have said the value of PKR is true value, and not the inflated one. So all of this inflation you are seeing now, is a result of the keeping the dollar stable using fx reserves. Our reserves were small as it was, so we could have only burnt the dollar for so long, before running out. Countries like China have 3trillion in reserves, so they can afford to do such things. China used the same policy to help its local industry. And now, there industries can support the country just by tapping local market, and aren't fully relied on export.

Looks like there’s nothing here for me to address as such, see the above paragraphs. As for your last points on metros and infrastructure, it’s the backbone of any economy, agree to disagree with your objection to it, it’s more than worth the cost. And the cost was incredibly low under CPEC financing costs.

If you’re going to quote me again, try addressing the points I made, most of this post was to prove to you that I’ve said what you said before. Nowhere did I claim anything that you focussed on rebutting.

 

[Morpheus]

I would ask politely that you address the points I made as opposed to reading in to what I did not say and use that as a rebuttal. Nowhere did I defend PMLN’s record on fiscal or trade management. The current economic crises minus covid, were largely created during their tenure.

In fact, the very first point you made below I was making before the 2018 election. I remember seeing IMF reports in 2016 pointing to the obvious, PKR was overvalued. PKR overvaluation and trade imbalance was contributing to consumer growth and lower inflation levels, but it was unsustainable. I was one of the only members here that I’m aware of that was pointing out that using SBP reserves to keep PKR overvalued would result in another crisis and another IMF bailout. I can’t find that post at this time.

I even said before the 2018 election that the economic situation that had been created in recent years will cause us to suffer what we are suffering now. Even now you’ll see me in other threads saying it’s not IK’s fault that the economy has fallen flat, it was set to crash given the course made roughly 2015-2017, by 2018 the writing was on the wall for anyone that has any economic knowledge.

So instead of making this partisan, I’d invite you to look what I am actually saying and address what is said, than reaching for PMLN tenure to argue against points I didn’t make, by furthermore using criticism of that government that I myself made while most people here were oblivious.

If you want to see evidence that of my thoughts on this subject, you can see some examples here, here, and here.


Looks like there’s nothing here for me to address as such, see the above paragraphs. As for your last points on metros and infrastructure, it’s the backbone of any economy, agree to disagree with your objection to it, it’s more than worth the cost. And the cost was incredibly low under CPEC financing costs.

If you’re going to quote me again, try addressing the points I made, most of this post was to prove to you that I’ve said what you said before. Nowhere did I claim anything that you focussed on rebutting.

None of my comments was calling you a PMLN supporter. It was just expanding on your points by explaining it in detail. You said not all imports need to be closed and i agreed with you, and gave an explanation on that. Notice how i quoted only part of your comment and not all of it.

 

[Jungibaaz]

None of my comments was calling you a PMLN supporter. It was just expanding on your points by explaining it in detail. You said not all imports need to be closed and i agreed with you, and gave an explanation on that. Notice how i quoted only part of your comment and not all of it.

Again, I didn't say that you called me a pmln supporter. I said that your initial quote was responding to my post by using arguments against PMLN policy, arguments I've never made... In fact, I myself said what you were saying in the past.

You talked about PKR overvaluation being a bad policy, as if I made the point. I didn't. I very specifically was addressing the misrepresentation of economic statistics in the OP, as you can see:

First of all, while it was necessary and good to shrink the trade deficit to imply that we saved all of that money is misrepresenting that figure. The money does not come out of the national exchequer but out of fx reserves. And also, I’d point out that reducing imports was the main cause of reduction in trade deficit. And doing this has serious consequences elsewhere. Too much imports may be bad, but reducing them has its own costs. Your consumers suffer, and the way it was achieved in Pakistan, mostly via a weakened PKR caused inflation and loss of purchasing power. Also, some imports are completely necessary and are crucial even for the export sector, so governments have to be careful not to go too far.

Next the percentage increase of exports he is quoting is very misleading, yes we’ve boosted export growth that’s a good thing. But if we’re exporting raw material and agricultural produce in larger quantities that really isn’t a big achievement, it’s the low hanging fruit, if you’ll excuse the pun. And quoting 1250% increase in garment exports to Africa? How is this even reasonable? What is the total value then? If we were exporting a small amount to begin with then this is again misleading.

Also, cheaper items become way more price competitive when PKR is weakened. I’d like to see Pakistan continuing export of higher value goods, garments as mentioned in the video, software and IT etc.

The rest of your posts I had no disagreement on. I don't wish to go over what I plainly said in posts. This is the second post I'm having to go over previous quote to explain.

So let's get back to the subject, I'll make it is easy for you to respond to the actual content of my original post, and not to this lengthy discussion over nothing. I said that claiming we saved USD 10bn is wrong, it sounds like we saved it at the exchequer when in fact it's FX reserves. Secondly, the trade imbalance has so far been largely corrected by PKR devaluation (which I agree was necessary and have stated so many times in the past), and that we need to follow up with much more difficult task of boosting higher value exports. Lastly I said that the statistics on Africa sound extremely misleading, which they are, 1250% export growth based on what total value for example. If you take issue with anything said in this paragraph, let's hear it, otherwise there's no point in discussing what went wrong in the past, I've already covered that and it seems there's no disagreement.

 

[Norwegian]

Also, cheaper items become way more price competitive when PKR is weakened. I’d like to see Pakistan continuing export of higher value goods, garments as mentioned in the video, software and IT etc.

Pakistan's export to gdp has been falling for decades compared to regional India or Bangladesh. It doesn't matter what you export but how much you export.

 

[Nilgiri]

First of all, while it was necessary and good to shrink the trade deficit to imply that we saved all of that money is misrepresenting that figure. The money does not come out of the national exchequer but out of fx reserves. And also, I’d point out that reducing imports was the main cause of reduction in trade deficit. And doing this has serious consequences elsewhere. Too much imports may be bad, but reducing them has its own costs. Your consumers suffer, and the way it was achieved in Pakistan, mostly via a weakened PKR caused inflation and loss of purchasing power. Also, some imports are completely necessary and are crucial even for the export sector, so governments have to be careful not to go too far.

Next the percentage increase of exports he is quoting is very misleading, yes we’ve boosted export growth that’s a good thing. But if we’re exporting raw material and agricultural produce in larger quantities that really isn’t a big achievement, it’s the low hanging fruit, if you’ll excuse the pun. And quoting 1250% increase in garment exports to Africa? How is this even reasonable? What is the total value then? If we were exporting a small amount to begin with then this is again misleading.

Also, cheaper items become way more price competitive when PKR is weakened. I’d like to see Pakistan continuing export of higher value goods, garments as mentioned in the video, software and IT etc.

Indeed, you are spot on here.

In the end consumption and supplies is really about volumes over prices. Prices can get complicated (for directed comparisons in whatever units) given the interlinking mechanisms there (big one in many cases is your local currency vs world currencies and you local inflation vs world inflation etc).

Volumes however remains simple...people can basically understand if you wanted to eat 2 apples today, but you could only get and eat one...you could only meet half of your requirement etc.

Volumes really is the first principles kind of thing.

It is thus instructive to have a look at the important details in some manner of better resolution to try get an idea of volumes (I am keeping things deliberately very simple for audience here since there is lot of lingo to describe these things):

https://oec.world/en/profile/country/pak/

Before I proceed, let me just say this is looking at GOODS only (services trade and remittances etc adds more layers to analyse further as to the general health of pakistan forex + economy...but for simplicity sake for now stick with goods)

Let us compare the month of highest import in current relative timeframe (may 2018) to the most recent month available (jan 2020).

Jan 2020 is also good because it by an large avoids the severe turbulence ongoing now because of the corona crisis + wild oil (energy) price movements.

Some extra info thats going to be handy:

https://www.macrotrends.net/1369/crude-oil-price-history-chart
https://www.xe.com/currencycharts/?from=USD&to=PKR&view=5Y

Looking at imports first. They vary greatly in demand elasticity (i.e consumption to price change).

Overall the trend is fairly linear in this time period (may 2018 to jan 2020)

i.e a fairly linear decline from 5.8 billion to 4.1 billion. A change of about 1.7 billion spread over about 20 months.

Thus at first glance a 10 billion total distributed reduction (in OP subject) looks fairly correct.

But like you said, is this good or bad?

Let us look at the most inelastic import (and massive base input) for indication of Pakistan economy ...i.e energy (esp. given its a energy consumer rather than producer).

May 2018 = 1.64 billion USD import
Jan 2020 = 1.15 billion USD import

From the oil price of these two months (and given Pakistan imports this in USD), one would assume an external demanded price ratio pressure (jan20/may18), ceterus paribus of roughly:

51/68 = 0.75

The actual realised ratio was: 1.15/1.64 = 0.70 .... so its fairly close, maybe about 5% volume erosion....which is low and proves this kind of good is also fairly inelastic.

However this shows Pakistan economy is fairly stagnant (since I am unaware of any massive upsurge in local primary energy sourcing to replace+substitute, but maybe @niaz knows more) in this time period given one expects an increase in energy volume consumption in a developing country from year to year (as it is a key base input for so much economic activity).

In any case the reduction in energy import seems to account for about 500 million USD per month in todays downstream snapshot.

But that still leaves (1.7 - 0.5) = 1.2 billion USD reduction to account for...and where.

Looking at OEC data again, some notable reductions were as follows:

Machines - 300 million

Chemicals - 250 million

Transport - 200 million

Metals - 150 million

Textiles (mostly inputs) - 100 million

A lot of these look like fairly base input stuff....esp. given Pakistan did not (and has not over this time period) adequately invested into capital goods production (last few times I looked into it) to explain these declines by say larger local volumetric production and supply for its economy.

Ceterus paribus, may 2018 import of 5.8 billion was about 5.8 *115 = 667 billion PKR worth of stuff

jan 2020 was: 4.1 *155 = 635 billion PKR worth of stuff.

Thus 1st stage cursory "volumetric" you can see there was not a huge decline from a local-oriented perspective.

But 2nd stage volumetric would have to account for inflation of that PKR too (esp relative to the USD inflation rate).

This would essentially be near 1:1 correlation with the overall terms of trade decline for how much a Pakistani resident (working within confines of his economy) has to work (or use wealth) to produce the means to pay for which to consume these things the local economy is not providing readily and competitively (i.e imports from foreign economies).

Whatever the accumulated total inflation has been of PKR (in this time period may18 - jan20) would thus be very close to the extra hours and extra savings and extra everything the layman in Pakistan has to put in to pay his way for what pakistan cannot locally supply.

The govt+corporates also does their bit through top off loans and attracting investments etc....through the capital side forces and pressure.....as this is the route to dip into more long term stuff (that defines the capital account in first place) and larger national+system credibility that the laypeople cannot (who operate in current account exclusively).

It has not been promising trend in Pakistan's case from what I have seen so far....either previous admin or this current one.

Or one can simply assume (since its import side) volumes are largely correlated to the USD amounts w.r.t final consumption level since USD was lot more stable (and a much bigger buffer to begin with) in this time period.

Coming to export side, its lot simpler overall (since Pakistan is not a huge exporter relative to its imports):

May 2018: 2.2 billion USD
Jan 2020 : 2 billion USD

Looking at the chart too, it seems fairly stable at this level overall per month.

Volumetrically (1st phase) though, given depreciation of PKR in this time period from 115 to 155....that means:

2.2 *115 = 253 bn PKR

versus 2*155 = 310 bn PKR

First glance seems good increase....but in the 2nd phase you would put in the relative inflation to get the real final volumetric trend (to see actual final physical materials activities efforts).

Once you do that, again it paints stark picture of stagnancy overall.

Actually I leave it as an exercise for members here to find/calc that inflation number for this period if they are interested. It is a vital cog in final transmission of reality (after forex forces and PKR:USD exchange rate) to the people of Pakistan on the ground.

My conclusion:

Pakistan needs deep deep apolitical institutional reform and massive sustained development of corporate structures.

You simply cannot tinker and dabble with some cherry-picked numbers here and there of foreign sector activity....this is political propaganda method.

@SQ8 @farhan_9909 @jaibi @Joe Shearer @PanzerKiel @Bilal Khan (Quwa)


N.B I wrote this all in one go with little proof-reading, please excuse any errors.

 

[Bilal Khan (Quwa)]

Indeed, you are spot on here.

In the end consumption and supplies is really about volumes over prices. Prices can get complicated (for directed comparisons in whatever units) given the interlinking mechanisms there (big one in many cases is your local currency vs world currencies and you local inflation vs world inflation etc).

Volumes however remains simple...people can basically understand if you wanted to eat 2 apples today, but you could only get and eat one...you could only meet half of your requirement etc.

Volumes really is the first principles kind of thing.

It is thus instructive to have a look at the important details in some manner of better resolution to try get an idea of volumes (I am keeping things deliberately very simple for audience here since there is lot of lingo to describe these things):

https://oec.world/en/profile/country/pak/

Before I proceed, let me just say this is looking at GOODS only (services trade and remittances etc adds more layers to analyse further as to the general health of pakistan forex + economy...but for simplicity sake for now stick with goods)

Let us compare the month of highest import in current relative timeframe (may 2018) to the most recent month available (jan 2020).

Jan 2020 is also good because it by an large avoids the severe turbulence ongoing now because of the corona crisis + wild oil (energy) price movements.

View attachment 649820

Some extra info thats going to be handy:

https://www.macrotrends.net/1369/crude-oil-price-history-chart
https://www.xe.com/currencycharts/?from=USD&to=PKR&view=5Y

View attachment 649821 View attachment 649822

Looking at imports first. They vary greatly in demand elasticity (i.e consumption to price change).

Overall the trend is fairly linear in this time period (may 2018 to jan 2020)

i.e a fairly linear decline from 5.8 billion to 4.1 billion. A change of about 1.7 billion spread over about 20 months.

Thus at first glance a 10 billion total distributed reduction (in OP subject) looks fairly correct.

But like you said, is this good or bad?

Let us look at the most inelastic import (and massive base input) for indication of Pakistan economy ...i.e energy (esp. given its a energy consumer rather than producer).

May 2018 = 1.64 billion USD import
Jan 2020 = 1.15 billion USD import

From the oil price of these two months (and given Pakistan imports this in USD), one would assume an external demanded price ratio pressure (jan20/may18), ceterus paribus of roughly:

51/68 = 0.75

The actual realised ratio was: 1.15/1.64 = 0.70 .... so its fairly close, maybe about 5% volume erosion....which is low and proves this kind of good is also fairly inelastic.

However this shows Pakistan economy is fairly stagnant (since I am unaware of any massive upsurge in local primary energy sourcing to replace+substitute, but maybe @niaz knows more) in this time period given one expects an increase in energy volume consumption in a developing country from year to year (as it is a key base input for so much economic activity).

In any case the reduction in energy import seems to account for about 500 million USD per month in todays downstream snapshot.

But that still leaves (1.7 - 0.5) = 1.2 billion USD reduction to account for...and where.

Looking at OEC data again, some notable reductions were as follows:

Machines - 300 million

Chemicals - 250 million

Transport - 200 million

Metals - 150 million

Textiles (mostly inputs) - 100 million

A lot of these look like fairly base input stuff....esp. given Pakistan did not (and has not over this time period) adequately invested into capital goods production (last few times I looked into it) to explain these declines by say larger local volumetric production and supply for its economy.

Ceterus paribus, may 2018 import of 5.8 billion was about 5.8 *115 = 667 billion PKR worth of stuff

jan 2020 was: 4.1 *155 = 635 billion PKR worth of stuff.

Thus 1st stage cursory "volumetric" you can see there was not a huge decline from a local-oriented perspective.

But 2nd stage volumetric would have to account for inflation of that PKR too (esp relative to the USD inflation rate).

This would essentially be near 1:1 correlation with the overall terms of trade decline for how much a Pakistani resident (working within confines of his economy) has to work (or use wealth) to produce the means to pay for which to consume these things the local economy is not providing readily and competitively (i.e imports from foreign economies).

Whatever the accumulated total inflation has been of PKR (in this time period may18 - jan20) would thus be very close to the extra hours and extra savings and extra everything the layman in Pakistan has to put in to pay his way for what pakistan cannot locally supply.

The govt+corporates also does their bit through top off loans and attracting investments etc....through the capital side forces and pressure.....as this is the route to dip into more long term stuff (that defines the capital account in first place) and larger national+system credibility that the laypeople cannot (who operate in current account exclusively).

It has not been promising trend in Pakistan's case from what I have seen so far....either previous admin or this current one.

Or one can simply assume (since its import side) volumes are largely correlated to the USD amounts w.r.t final consumption level since USD was lot more stable (and a much bigger buffer to begin with) in this time period.

Coming to export side, its lot simpler overall (since Pakistan is not a huge exporter relative to its imports):

May 2018: 2.2 billion USD
Jan 2020 : 2 billion USD

Looking at the chart too, it seems fairly stable at this level overall per month.

Volumetrically (1st phase) though, given depreciation of PKR in this time period from 115 to 155....that means:

2.2 *115 = 253 bn PKR

versus 2*155 = 310 bn PKR

First glance seems good increase....but in the 2nd phase you would put in the relative inflation to get the real final volumetric trend (to see actual final physical materials activities efforts).

Once you do that, again it paints stark picture of stagnancy overall.

Actually I leave it as an exercise for members here to find/calc that inflation number for this period if they are interested. It is a vital cog in final transmission of reality (after forex forces and PKR:USD exchange rate) to the people of Pakistan on the ground.

My conclusion:

Pakistan needs deep deep apolitical institutional reform and massive sustained development of corporate structures.

You simply cannot tinker and dabble with some cherry-picked numbers here and there of foreign sector activity....this is political propaganda method.

@SQ8 @farhan_9909 @jaibi @Joe Shearer @PanzerKiel @Bilal Khan (Quwa)


N.B I wrote this all in one go with little proof-reading, please excuse any errors.

The first 'deep' is DOA in Pakistan, much less the rest, sadly.

I keep saying this, but it's true. If Pakistan had been blessed with GCC-level oil and gas, its end-state would've been very similar to what it is now (albeit with lots of cosmetics).

Pakistan may not have a royal family like the Saudis, but it suffers from layered citizenry. Some get more rights and entitled than others due to the fact that they're closer to the resources of the state. The 'how' or 'why' of it might be entirely random, but there's a predatory group that benefits from the status-quo.

Unfortunately, any deep reform -- which in my book is actually a call for systemic change, to be honest -- will get incredible push-back. From the salaried bureaucrat coming in to drink chai and engage in guppay to the politician who gets a cut, I can say 50%+ are going to lose out.

tbh all you can hope for is the other <50% to punch 2-3X above their weight and force the change.

 

[volatile]

and I will believe you!! you educating cranny.

Im not here to prophecies ,believe what you want to ,a frog sitting in the bottom of well also thinks that his entire world its just education and information makes us a better man

 

[Path-Finder]

Im not here to prophecies ,believe what you want to ,a frog sitting in the bottom of well also thinks that his entire world its just education and information makes us a better man

Indeed my friend I hope you are not that frog whos limited by the depth, height and walls of the well.

 

[Norwegian]

It has not been promising trend in Pakistan's case from what I have seen so far....either previous admin or this current one.

So what do you purpose? We know the problems but not the solutions.

 

[niaz]

However this shows Pakistan economy is fairly stagnant (since I am unaware of any massive upsurge in local primary energy sourcing to replace+substitute, but maybe @niaz knows more) in this time period given one expects an increase in energy volume consumption in a developing country from year to year (as it is a key base input for so much economic activity).

To the best of my info, during the last full year before the PTI took over, Pakistan’s crude oil production was 92K to 95K BPD, while the oil consumption about 500K BPD.

The total installed nameplate capacity of the 5 Pakistani refineries is 417K BPD. But except for PARCO, all other refineries are simple inefficient hydro-skimming units, and hence do not run at full capacity. Since crude oil imports are in the region of 140K BPD, the rest of the demand is met through the import of refined products.

While every other day we hear about “Massive Oil & gas finds”, the massive finds are in fact small. For example production from the 13 new oil & gas discoveries between July - Dec 2018 amounted to a mere 5.4K BPD of crude & 105 mmcfd of gas. Considering that gas production/demand short is expected to reach about 450 mmcfd in 2021. The new discoveries helped but only to a small extent.

No one but the PTI gov’t is culpable for the recent gasoline shortage at the pumps. In order to reduce the trade deficit and expected reduction in oil demand, GOP had completely banned the imports of crude & refined products during the 26Th March - 25 April period. Additionally, they unnecessarily reduced the price only to raise it again a couple of weeks later.

My Economics education is limited to what I studied in the MBA Evening classes during 1970- 71 at the Long Island University in New York, nevertheless, in my view the following comments are pertinent.

Admittedly the trade deficit during the last financial year of PML-N gov’t (2017-2018) at $37.7-bilion was massive. To examine it in detail, it is necessary to look at the $60.9-billion import bill. According to the published sources the break-down of imports is as under:

Raw material: $11.723 – billion
Capital goods: $12. 457-billion.
Intermediate goods: $16.731-bilion
Consumer goods: $19.200-bilion.

Intermediate goods/ producer goods are those goods that are used in the manufacture of other industrial products. Steel plate, timber, precious metals & palm oil, glass, etc. are the example of intermediate goods. I am not sure how the crude & oil products are classified in Pakistan, however, crude & refined products imports stood at $9.014-billion during the 2017-2018 period.

You would note that 67% of the imports ($40.91) were the goods directly required by the industry thus contributing towards the GDP growth & development. $19.2-billion is however a very large sum for a poor country like Pakistan to spend on consumer goods import. One economist I know advised me that one of the reasons being that Chinese consumer goods, being cheaper & of better quality were hurting the ‘Import Substitution’ industries of Pakistan. (Chinese imports were $14.454-billion).

Even though large Trade Deficit is not considered very desirable, in my opinion, it is neither good nor bad. A large trade deficit for a country like Pakistan, which needs to import capital goods to set up industries to generate employment and petroleum to keep the country moving is actually a sign of a growing economy provided most of it is spent on development and not siphoned off as ‘over-invoicing’ by the corrupt.

Despite the huge trade deficit, IMHO Pakistan’s economy was not stagnant at the end of PML-N gov’t in 2018.

P.S.
All the figures used here are available if one cares to research through the internet.

 

[Nilgiri]

So what do you purpose? We know the problems but not the solutions.

I honestly don't know man. You are right that solutions (actually on ground and sustaining them) are the difficult bit.

There is no proposal from one person that can work...it has to be lot of people in places of note working together over long period of time ( finding the intricacies, prioritising and achieving and spreading how to do it to others)....working with system but pushing for the larger change in it constantly. This is all very different from country to country....and even within country (state to state etc).

They don't all need some massive unified goal and complete vision, but they need to do their bit all the time...but in general humans get (or inherit) some place better, and get ingrained into status quo etc..... because its easy that way....rather than give back to society genuinely and try pull up lot more people.

Some even see it as zero-sum, that if more people improve, they will compete for more "up here" instead of "down there" etc....because everything is absolutely finite you see, they have no belief in potential and the infinite realm....no matter the evidence, no matter the philosophy and logic you try to reason with them...

I can go into plenty of depth about the depravity of elitists in general (and I have had misfortune to come across a number of them in real life, and even forced to tolerate their immoral garbage...but I made sure to seed some doubt in their mind at least I feel)....but really its a dark subject of human psyche that I don't want to delve into much more.

Status quo inertia combined with ego, fear and greed....these are the sad wretched rocks of permanence, never eroding.... seemingly indestructible....saddled to too many of us ever since our first ate from that tree.

When we have our sparks that do sustain, there generally needs to be a critical mass of enlightened people in the highest echelons simultaneously at same time as somehow critical mass of routes and openings formed for lot of regular oppressed masses to rise, network and strive and stay rooted and genuine to pull more people up to that level at least. This is what I have seen in certain times and space in history in the world.....maybe it is God's intervention in the end or just plain luck and circumstance all adding up....either way it can happen (and great tide of inertia it can bring for a number of generations till its flame starts to wither and perish too), but it doesn't happen frequently at all. Thank God we occupy only one tiny of speck of dust in the end....we are not ready for grand purpose at all.

 

[Norwegian]

Even though large Trade Deficit is considered desirable, in my opinion, it is neither good nor bad. A large trade deficit for a country like Pakistan, which needs to import capital goods to set up industries to generate employment and petroleum to keep the country moving is a sign of strong economy moving is actually a sign of a growing economy provided most of it is spent on development and not siphoned off as ‘over-invoicing’ by the corrupt.
Despite the huge trade deficit, IMHO Pakistan’s economy was not stagnant at the end of PML-N gov’t in 2018.

Trade deficit is not a problem if you have some way to offset it from current account deficit. As you see here with the growth of trade deficit, Pakistan suffered from massive current account deficits in the previous government.

It means Pakistan was on the verge of bankruptcy if PTI govt had not course corrected it. Yes, economy was not stagnant during PMLN govt because they put the country on import-led growth path, which is not sustainable, and eventually leads to financial crises and bankruptcy.

 

[Nilgiri]

$19.2-billion is however a very large sum for a poor country like Pakistan to spend on consumer goods import. One economist I know advised me that one of the reasons being that Chinese consumer goods, being cheaper & of better quality were hurting the ‘Import Substitution’ industries of Pakistan. (Chinese imports were $14.454-billion).

It is indeed at first glance, but one also needs to do a study of the multiplier effect in economy of even these consumer goods.

Capital goods and intermediate goods, of course logically they are easily understandable in this matter as you bring up.....given there are subsequent additions/productions to be made that add value in economy readily on top right away.

But utilisation of consumer good is somewhat more nuanced study as to its value creation. Some are truly final esp compared to their monetary value (i.e low bang for buck, think a luxury car import etc...only added value multiplier is hiring a driver and providing employment/income to some garages etc).....but others generate lot of huge value simply by their use (think of cellphone for a street vendor) compared to list price.

In general it needs a good understanding of what are the best low hanging fruit to grab and develop more inside Pakistan (for supply chain of products and services) with good cognisance of its labour force skill levels etc and how to get those organised. Then robust corporate network needs developing too, thats where ease of doing business etc comes into play from govt end, and govt improving its bureaucracy for that.

It need not automatically have to be consumer goods > intermediate goods > capital goods in priority of competitive replacement. There is low hanging fruit everywhere in all 3 (like some capital goods Pakistan can make right now that its not doing....and some consumer goods will be priced out maybe even permanently.... but of high benefit to import and consume given further multiplier effects etc) and really things can be done simultaneously if you have the right methodology in place to go about it.

A large trade deficit for a country like Pakistan, which needs to import capital goods to set up industries to generate employment and petroleum to keep the country moving is a sign of strong economy moving is actually a sign of a growing economy provided most of it is spent on development and not siphoned off as ‘over-invoicing’ by the corrupt.

This is true. But one needs to look at the larger trend to get understanding how much is novel growth in capital good consumption/deployment versus depreciation replacement driven.

Pakistan gross capital formation has been very anemic for a long time now... so this leads me to assume a couple things:

a) A large portion of its capital goods imports are depreciation driven rather than huge industry expansion driven.

b) If you break down the capital goods into further categories, not much composition will be of the "1st tier" sort that are related to more capital goods production

That would be example of something a specific policy planner/economist in Pakistan would look at to suggest the best prioritisation of industry reform (improving stuff within the existing envelope)

A higher tier team in the bureaucracy would ideally be more oriented toward the best steps to be taken to see increase gross capital formation this decade at least (growing the envelope to work with in first place)

Pakistan really needs to do something about its GCF and investment rate...it has sorely missed the bus for 3+ decades (given the globalisation opportunity post cold war) and counting... it cannot continue on this route anymore....this administration is not taking it seriously either.

Big 3 in South asia for constant dollar GFCF per year :

https://data.worldbank.org/indicator/NE.GDI.FTOT.KD?locations=IN-PK-BD

In 1990 the situation was:

India - 118 billion USD
Pakistan - 15 billion USD
Bangladesh - 6 billion

In 2019 the situation was:

India - 923 billion USD (as bad as Indian govt policies have been, long OT subject i wont go into)
Bangladesh - 65 billion USD (ditto)
Pakistan - 33 billion USD (......ugh)

If there is one single issue Pakistan needs to solve first thing @Norwegian , I would say its this one....because so much is dependent on it in 5 and 10 year time frames etc, you get many many birds with just one stone....it literally dictates what your idling rpm is without pressing gas pedal....what your lean year "base" growth is going to be in future.

The status quo cartel has other ideas it seems apparently. Pakistan is stuck below 20% GCF rate since the early 90s....the musharraf regime came closest to breaking above 20% in 2005-06 timeframe....till it promptly plunged back to the 15% level yet again......at an era a developing country needs to strive and achieve 25% and 30% as bare minimum to have a real chance at any kind of sustained breakout. Its frankly inexcusable.

 

[Norwegian]

If there is one single issue Pakistan needs to solve first thing @Norwegian , I would say its this one....because so much is dependent on it in 5 and 10 year time frames etc, you get many many birds with just one stone....it literally dictates what your idling rpm is without pressing gas pedal....what your lean year "base" growth is going to be in future.

Capital formation comes from investment into local industries, that produces goods and services for export, earning hard currency for the country. Here is Pakistan's export to GDP for the last 3 decades:

See the problem? During his first term as PM, donkey Nawaz Sharif passed economic reforms act that legalized money laundering by removing all checks on capital movement in and out of the country. Thus the elite of Pakistan started massive investments in non productive sectors of the economy such as real estate. As more and more money flowed in this sector, investment in more productive parts of the economy declined. On top of that in the 90s in the govt of Doggy Zardari we got independent power producers that gave Pakistanis most expensive electricity in the region. Thus Pakistan could not compete with regional rivals and many prominent industrialists moved out of the country. Who shall we blame but our own anti army democrats?

Even though large Trade Deficit is not considered very desirable, in my opinion, it is neither good nor bad. A large trade deficit for a country like Pakistan, which needs to import capital goods to set up industries to generate employment and petroleum to keep the country moving is actually a sign of a growing economy provided most of it is spent on development and not siphoned off as ‘over-invoicing’ by the corrupt.

Despite the huge trade deficit, IMHO Pakistan’s economy was not stagnant at the end of PML-N gov’t in 2018.

There is good and bad trade deficit. In Pakistan's case it was mostly bad thanks to army hating democ(rats)

https://twitter.com/x/status/1281744664681472000