Is Pakistan facing bankruptcy?

[opinion786]

Well if you have the figures then present them, your original post was well written and I haven't answered it yet but you, like everyone else is just presenting part of the picture. Since you present the pictures I have the right to contest them and then the burden of proof is on you to defend yourself. But fine...I can also get figures if needed. I am sure there are sources online that can back me up from the WB, IMF and GOP and I will dig around for them when I have time but right now I am just arguing based on CONCEPTS. Figures are just the icing on the cake, it's the concepts which are more important.

I have the figures but I'll keep them for now. I'm sure with so many figures that I qouted above ... be sure I'm not twisting. I know figures by heart.

I'm not presenting you part of picture. The whole idea of ANY economy is built upon TRUST & CONFIDENCE & POLICY FORMING !

Shaukat Aziz & former governor State bank had credibility enough to go to the world and seek rescheduling of debts, boom capital inflows and manage revenue generation.

Public confidence & trust had fallen after Nawaz Sharif FREEZED our $10 billion reserves in 1998. Musharraf & Shaukat Aziz rebuild that trust!

Our Trade deficit was $13.53 billion in 2006-07 under Shukat Aziz and now 2008 its $20.74 billion. How did Shaukat Aziz mamange to keep it controlled? Infact Shaukat Aziz era in 2007 saw exceptional INCREASE in world OIL prices and through out 2007. That did hurt our import bill.

But, now Oil is back to $90 per barrel. Policies and vision make economies!

 

[maqsad]

well no im not a die hard fan of these courses but i had always been critical of FDIs.

As according to my little brain i think the foreign investers sometime add to your finencial crisis by withdrawing their money just like the recent crisis when foreign investerd withdraw their money from Karachi Stock Exchange.

And we always think that party will never last forever which is a great bluff. iguess.

Too much FDI is definately a danger to any economy. Why do you think a foreing investor invests in the first place? They do it to make money! If I am some rich firm who invests $1 billion in a steel mill in pakistan then every year I will have $200 million in profits. Where will those profits go? OUT OF PAKISTAN! So even if the investor is "confident" he will still take out $200 million a year quietly! But when a crisis happens then he also takes out the $1 billion or runs off with 90% of his factory equipment(which he has a right to) and sells the land or rents it(and takes out the rent from pakistan too each month).

But you see all these brainwashed people crying and shaking with fear because "FDI is flowing out" and "foriegn investors are losing confidence" and blah blah blah. I say the hell with them if they run off now, let them out and NEVER LET THEIR GREEDY FINGERS BACK IN AGAIN!

 

[opinion786]

That is ridiculous! Everything a country BUYS has to equal everything it SELLS! There is no way around it unless the country sells its soul and depends on BHEEK and USURY-loans. The value of foreign remittances, foreing investment returns, manufacting exports, service exports, raw material exports HAS TO EQUAL THE VALUE OF IMPORTS to keep the economy healthy. There is no way around that unless you want to hack off pieces of your country and sell it to foreigners.

Read my post again to understand what I wrote. I gave you example of booming economy of India:

Exports - $ 125 billion
Imports - $ 188 billion
Deficit - $ 63 billion
Public debt - $ 132 billion

But, Reserves - $308 billion (this exceeds the debt + deficit) so India remains on the safe side.

Yes, they should be equal IDEALLY. How many countries have it equal?

But they DO NOT cause a problem if your Reserves exceed your deficit. You get your fiscal space to create an enviroment to generate income, capital inflows and attract investment. Further, if you have exceeding reserves you can open your personal INEVSTMENT FIRMS, like India is trying.

Singapore also has significant government funds including Temasek Holdings and GIC.

Trad deficit is NOT a problem yet it BECOMES one ... if one is visionless and lacks credibilty & trust!

 

[Goodperson]

Finance crisis has hit US and Western countries hard because their economies are integrated and because of their credit based economy.
Nations like Pakistan may not face the same in that proportion as the Globalization is far less and the credits are far less and agriculture also play major part. However Pakistan is a huge importer of Oil, and it needs to take care of Balance of Payments. For that it has to ear foreign currency by way of increasing exports. It also has to reduce expenditure on Imports.

 

[Kumar]

Actualy we had never thought of putting our economy on track to self-sustained growth.

We had been and still we go all dancing over the temporary bubbling of our economy.
The temporary bubble is the cause of such kind of balance of payment crisis.

I would not call it bankcruptcy but balance of payment crisis.
I remember once i was talking to my Indian friend and we were discussing the same crisis which had gripped India in 1991 when it had only 30 billion dollars left with.
But then India had taken some strong and solid measures which had helped her.

But alas i am sad to think that our current government of Zardari is still looking for the same shortsighted policy to overcome this crisis.

(i am not well versed with economy things so if i am wrong in above post my appology for that )

We are just going through one of of the worst situation in regs to economy.

Nothing is moving. Projs are canceled or its on hold. many of my friends are in bench even me too. I think 700$ bail out is not enough for US Still the dow is in negative. I dont think the situation will improve until 2010. House for $300k 2 yrs back is goin for $150k. people are just struggling to pay mortgages.

$100B for pakistan may help in short term but it should open up the economy like what singh did for india in 1990s. Fed rate cut may also help in short term.

 

[Vinod2070]

Foreign investment brings a lot of benefits to an economy. It brings in new technologies, best practices, expertise and creates a local multiplier effect.

Are all the developed economies fools to welcome FDI? China gets one of the highest FDI and seems to have benefited a great deal.

It is not complementary to local investment but supplementary. The countries can take care to guide it in the areas that it wants to, but overall its a net positive.

I am not sure why, what has been settled the world over decades ago is being sought to be re-invented? Do we have another Adam Smith here!

 

[Kumar]

Finance crisis has hit US and Western countries hard because their economies are integrated and because of their credit based economy.
Nations like Pakistan may not face the same in that proportion as the Globalization is far less and the credits are far less and agriculture also play major part. However Pakistan is a huge importer of Oil, and it needs to take care of Balance of Payments. For that it has to ear foreign currency by way of increasing exports. It also has to reduce expenditure on Imports.

I talked one of my pakistan friend. He said most of the cars in pakistan are running in CNG. its a great step. Hats off to Pakistan.
CNG is cheap and less pollutant than pertrol.

US is now thinking about CNG. its a very late move.

 

[opinion786]

But you see all these brainwashed people crying and shaking with fear because "FDI is flowing out" and "foriegn investors are losing confidence" and blah blah blah. I say the hell with them if they run off now, let them out and NEVER LET THEIR GREEDY FINGERS BACK IN AGAIN!

FDI or foreign investment just doesn't bring in the capital. Its brings with it Management, Project development techniques, Technology, develop Human Resouces, implement Quality & Safety standards and Trains local pakistanis.

Pakistan is sufficient in Gas, Coal and Gold. But, we DO NOT have the Technology to explore and exploit it ! Pakistan can never benefit from our vast natural Resouces & reserves. We need foreign Technology and management & latest technological gadgets!

FDI is NOT about money ... its all the above. Why do you have Chinese working on Subakzai Dam? Why Europeans working here?

 

[opinion786]

I talked one of my pakistan friend. He said most of the cars in pakistan are running in CNG. its a great step. Hats off to Pakistan.
CNG is cheap and less pollutant than pertrol.

US is now thinking about CNG. its a very late move.

Thanks! Yes, Pakistan is the second/thid largest country in world to promote CNG.

The Compressed Natural Gas (CNG) sector of Pakistan has attracted over Rs 70 billion investments during the last five years as a result of liberal and encouraging policies of the government.

Presently, some 1,765 CNG stations are operating in the country, in 85 cities and towns, and 1000 more would be setup in the next three years. It has provided direct employment to 30,000 people in the country and some 200,000 indirect employment.

 

[keeninterest]

We are just going through one of of the worst situation in regs to economy.

Nothing is moving. Projs are canceled or its on hold. many of my friends are in bench even me too. I think 700$ bail out is not enough for US Still the dow is in negative. I dont think the situation will improve until 2010. House for $300k 2 yrs back is goin for $150k. people are just struggling to pay mortgages.

$100B for pakistan may help in short term but it should open up the economy like what singh did for india in 1990s. Fed rate cut may also help in short term.

i am not so sure the rate cut would be of much help in pakistan's case, they r already struggling at 30% inflation rate if i am getting right and if they were to push in more money into the system that would futher add to the woes of hyper inflation, what say?

 

[Spring Onion]

That is ridiculous! Everything a country BUYS has to equal everything it SELLS! There is no way around it unless the country sells its soul and depends on BHEEK and USURY-loans. The value of foreign remittances, foreing investment returns, manufacting exports, service exports, raw material exports HAS TO EQUAL THE VALUE OF IMPORTS to keep the economy healthy. There is no way around that unless you want to hack off pieces of your country and sell it to foreigners.

but keeping in view the gap between the value of our export and value of the import, we have very less options to follow and even then our leaders are not going to the less bad choices rather they are going again for borrowing.

As far as i had understood if we dont have a good way out then we have bad options of either borrowing, gold pledg or privatization of companies.


These are bad choices but i feel there are some other way out too but only if our leaders are ready for steping into the difficult arena.

 

[Spring Onion]

I talked one of my pakistan friend. He said most of the cars in pakistan are running in CNG. its a great step. Hats off to Pakistan.
CNG is cheap and less pollutant than pertrol.

US is now thinking about CNG. its a very late move.

Yes dear about 80% vehicles are runing on CNG though it is becoming costly day by day but still i like it its not polluting the atmosphere.

 

[Contrarian]

Um..dude, you dont ask for ToT in making cellphones! LOL!

If you want to change the practice of importing cell phones You raise taxes on imported cellphones's, and provide incentives to the company to setup a factory in your country. If the demand is large enough, the company will definitely open its own factory directly in your country.

So this way, even though the company makes profits, it also provides jobs and money to your country, otherwise some other contry gets the factory-the jobs and money while all you do is import the phones. And after the company sets up the factory, they also have to undertake some CSR. So its all good.

 

[blain2]

Why is it that when any pakistani hears talk about "investors" turning up their noses they have heart attacks? Why should a third world economy be so anxious as to become an INVESTMENT of foreigners? What is wrong with INVESTING IN YOURSELF and standing on your own two feet and exporting and producing equal or more to what you import and consume? Why are INVESTORS with their own CAPITAL so essential to the equations.

Why do you think investors invest in a foreign country to begin with? They do it for PROFIT mostly which means if someone invests $1 billion they expect to MILK $5 billion in the next decade or two and TAKE IT ALL OUT OF PAKISTAN. Now if this "investment" was made by native pakistanis, or the pakistani govt, or even joint ventures and there were laws againt capital flight then money would not run off like this.

None of these investors who are running off intended to invest in pakistan for the benefit of the pakistani people, they did it to make money and then pull their loot OUT of the pakistan economy. The govt should encourage indigenous domestic investment which is guaranteed to STAY in pakistan through thick and thin.

All talk, no substance. "Invest in yourself" is pretty much a cliche. First lets see someone do it in Pakistan and then we can say that its an alternate. In reality, Pakistani leadership is incapable of surviving by investing in themselves. They simply do not have the money and their rudderless leadership gives no confidence to domestic or foreign investors.

Also your assumptions about investing in yourself means that you have to have the capital to invest in the first place. The government is broke and by being so broke, why would some private investor in Pakistan want to take such a big risk by putting his/her money into the country? What if there is a default on their investment? With the government being so broke, the chances of a government security on their investment is non-existent. Patriotism is all nice and dandy, but you encourage patriotism by leading from the front and setting personal examples which are patently missing in the Pakistan of today. (last we heard, Zardari had most of his massive financial portfolio outside of the country, how about getting the old chap to bring some of this money inside Pakistan and invest?). Regardless of your gripe with Musharraf, at least all of the latter's assets are in Pakistan. Can't say the same about the democrat leading Pakistan currently.

While you go on and on about Shaukat Aziz's blunders, realize that while the economy had been boosted by the consumer market, there were underlying structural reforms made by the previous government which ensures that institutions like the Banking sector, telecom, manufacturing can continue to operate even in times of financial crunch. Add to this the expansion in the Tax revenue base so its not all bad either (although if it were up to you, you would like to pass the buck to the previous government and let PPP and the current government get a free pass out of this situation that is partly of their own making).

 

[blain2]

But you see all these brainwashed people crying and shaking with fear because "FDI is flowing out" and "foriegn investors are losing confidence" and blah blah blah. I say the hell with them if they run off now, let them out and NEVER LET THEIR GREEDY FINGERS BACK IN AGAIN!

So how do you propose Pakistan import essentials such as heavy machinery, expand infrastructure etc. etc. without inflows of capital? The Government is broke! Not sure what part of that is not making any sense? How can the industry grow if the government does not have any way to generate revenue? As bad as their (foreign investors) greedy fingers are, they allow for expansion of the economy. Without it, you better ask Zardari and team to start digging for Gold and Oil in Pakistan. There is no other way. Nobody in Pakistan wants to pay taxes, on top of that you say tell Forex and foreign investors to buzz off, well sir I hope you have a concrete solution beyond this bashing of the fundamentals of economic growth. After reading your posts, I see a lot of steam being let off by you, but nothing of substance. My apologies for coming across as such. Just trying to understand what you are trying to get at.