International Political Economy Zone: South Asia

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One Belt, One Baloney? PRC's Silk Road Revival Doubts

♠ Posted by Emmanuel in China,Development,South Asia,Southeast Asia at 5/14/2017 04:15:00 PM

Over the weekend, Chinese President Xi Jinping hosted an elaborate event in Beijing concerning the PRC's idea of reviving the historical Silk Road. Spanning much of Asia and the Middle East besides, this trade route epitomized many of the things China wants to be today: (1) at the center of world trade, (2) involved in infrastructure, and (3) a prime mover of international relations. This, of course, stands in contrast to the retrograde "America First" stylings of the racist-protectionist-isolationist American president, Donald Trump.

Some hackles were raised about the invitation being extended to North Korea, of all nations, but certainly we'd rather have it peacefully trading with the rest of us than firing missiles to draw attention to itself?

More to the point, though, how realistic is this plan? A few months ago, an op-ed appeared in the Hong Kong-based South China Morning Post (usually a Communist Party-friendly outlet) placing the "One Belt, One Road" project's viability in question by way of Japan's example from only a few years back of doing something similar: using infrastructural might to extend not only diplomacy but also trade with its neighbors:

Facing a deep slowdown after years of investment-fuelled growth that culminated in a huge property and stock market bubble, the leaders of Asia’s largest economy [China] come up with a cunning plan. By launching an initiative to fund and construct infrastructure projects across Asia, they will kill four birds with one stone.

They will generate enough demand abroad to keep their excess steel mills, cement plants and construction companies in business, so preserving jobs at home. They will tie neighbouring countries more closely into their own economic orbit, so enhancing both their hard and soft power around the region. They will further their long term plan to promote their own currency as an international alternative to the US dollar. And to finance it all, they will set up a new multi-lateral infrastructure bank, which will undermine the influence of the existing Washington-based institutions, with all their tedious insistence on transparency and best practice, by making more “culturally sensitive” soft loans. The result will be the regional hegemony they regard as their right as Asia’s leading economic and political power.

However, the author Tom Holland delivers the punch line that, actually, the Japanese tried all this stuff before and failed:

[I]t’s actually a description of a strikingly similar plan rolled out by Japanese prime minister Keizo Obuchi in the 1990s. That too promised to provide work for Japan’s recession-hit construction sector by building Japanese-funded infrastructure projects around Asia. And it even included a proposal – never realised – to establish an Asian Monetary Fund to lend to regional governments on easier terms than either the IMF or World Bank.
Unfortunately for Beijing, the precedent is hardly encouraging. From the start the scheme was plagued by bickering over conditions and allegations of corruption. A handful of infrastructure projects did get built, but the reality fell woefully short of Tokyo’s grandiose dreams. Far from cementing Japan’s economic ascendancy across Asia, the project left a legacy of bad blood, and marked the beginning of a financial retreat from around the region that Japan has only recently begun to reverse.

The rest of the editorial notes that rampant corruption elsewhere siphoned funds away from projects, and those bits that actually did get built ended up as "white elephant" projects: transport initiatives that cost so much to maintain that they could not be sustained and were eventually shelved. Certainly, the OBOR and New Silk Road tags characterize some grandiose initiative. (See the map pabove.) Whether the Chinese have the actual sense to scale these to reality-based bits is another question since linking the Middle East all the way to the Far East is not a vision based on modesty.

Scaling it appropriately to meet local needs of the countries involved is key. That is, participating countries will plump for maintaining infrastructure built (with Chinese support) insofar as they can benefit from it going forward. However, if benefits are not evident--or mainly serve the purpose of transit through a country instead of serving the citizens of the countries in question first and foremost--the Japanese example provides ample cautions.

UPDATE: A warning is that investment in OBOR countries has, actually, dropped off in recent times, though there are caveats associated with this as a gauge:

Foreign direct investment from China to countries identified as part of the BRI fell 2 per cent in 2016 year on year and has dropped an additional 18 per cent so far in 2017, according to commerce ministry data. Non-financial FDI to 53 BRI countries totalled $14.5bn last year, comprising only 9 per cent of overall outbound FDI...

Chinese experts counter that published figures do not paint a complete story. Jia Jinjing, chief researcher at the Renmin University’s Chongyang Institute for Financial Studies in Beijing, said much outbound FDI passes from China through an intermediate country before reaching its final destination, making the commerce data an unreliable gauge of total BRI investment.

Does Pakistan Really Have "Record" Forex Reserves?

♠ Posted by Emmanuel in IMF,South Asia at 11/03/2015 03:38:00 PM

Pakistan's aid donors help bolster its reserves--not financial inflows for the most part.

It is sad that accumulating $20B in reserves--this in a country with a population of 182 million--is considered as a "record." However, that is the case for Pakistan and its recent report on foreign exchange reserves. As chronicled in this blog [1, 2], Pakistan is a habitual borrower from the IMF--a dubious distinction if there ever was one that even the IMF would prefer avoiding. Unfortunately, Pakistan's bolstered reserves, low as they are in ultimate terms--China has over a whopping 175 times more by my estimates--are mostly the result of the IMF juicing up the coffers:

Pakistan’s record foreign-exchange reserves are masking economic weaknesses that risk pushing the nation toward more aid from the International Monetary Fund. At least half of the country’s $20 billion stockpile comprises debt and grants, almost all of which have flowed in since Prime Minister Nawaz Sharif took office in May 2013. That money could leave quickly as Pakistan begins repaying the IMF in 2016 or if oil prices surge, leading to another balance-of-payments crisis.

"This is borrowed money and not a reflection of a stable economy," said Yawar uz Zaman, vice president for research at Karachi-based Shajar Capital Pakistan Pvt. "Finance costs will continue to grow in the years to come, which will mean we will go for another loan from an international lender."

Sharif won a $6.6 billion loan from the IMF soon after taking charge, triggering a stock market rally that has put Pakistan among the world’s best performers. Since then, however, he’s struggled to attract more stable inflows as a shaky global economic recovery damps demand and makes investors wary.

The rest comes with a little help from Pakistan's [self-styled] friends. Other contributions are from non-financial and more political- or security-related sources in the form of the Saudis chipping in another $1.5B and the American-led coalition another $2.8B. In other words, the inflows are not from financially sustainable sources like foreign investment or export proceeds.

People of goodwill wish Pakistan well, but the truth is that it hasn't really done anything to make itself attract more financial inflows outside of charity. Pakistan remains, in the words of Anatol Lieven, a hard country.

Building Roads: PRC Plot to Buy Off Pakistan?

♠ Posted by Emmanuel in China,Infrastructure,South Asia at 5/12/2015 01:30:00 AM

Follow the money trail on the mooted China-Pakistan superhighway.

The Chinese way to winning friends by buying off nations is formulaic by now: The first pillar of this diplomatic outreach effort involves unconditional lending of vast sums of money. To this end, the Chinese like to contrast their "mutual benefit" and "mutual respect" against the laundry list of conditionalities imposed by the likes of the World Bank, IMF or regional development banks. The second pillar consists of infrastructure: If the Chinese have gained experience in any particular area over the past few decades, it's in building structures. You name it--airports, power stations, roads, railways, seaports, even football stadiums--and the Chinese have accumulated vast experience constructing it. In particular, connecting to other countries enables either the smoother process of extracting raw materials necessary for China's massive manufacturing machine and the export of finished goods in the opposite direction.

Governance? Human rights? Quite frankly, China doesn't give a &*^% about any of those things. Hence the Chinese reading of the principle of "non-interference" in others' affairs.

In terms of being chronically hard-up, few countries in the Asia-Pacific come close to Pakistan. This repeat borrower from the IMF certainly chafes at the conditionalities imposed upon it time and again. And for what? The monies provided are not especially large. Into this picture comes China attempting to win friends and buy off nations. You don't need a PhD in economics or political science to figure out how to win the hearts of the Pakistanis after years of having to deal with the loathsome, self-important Yanquis and their assorted minions: shovel wads of cash with few to no strings attached. Build infrastructure while you're at it, too.

To no one's surprise, China is using both pillars in attempting to win over its neighbor:

The focus of spending is on building a China-Pakistan Economic Corridor (CPEC) - a network of roads, railway and pipelines between the long-time allies. They will run some 3,000km (1,800 miles) from Gwadar in Pakistan to China's western Xinjiang region. The projects will give China direct access to the Indian Ocean and beyond. This marks a major advance in China's plans to boost its influence in Central and South Asia, correspondents say, and far exceeds US spending in Pakistan.

Once more, Big Things are planned for Pakistani development:

Is Pakistan on the verge of becoming the Asian Tiger Prime Minister Nawaz Sharif said it would become when he was last in power in 1997? China plans to inject some $46bn - almost three times the entire foreign direct investment Pakistan has received since 2008. Many say Mr Sharif's penchant for "thinking big" and China's increasing need to control maritime trade routes may well combine to pull off an economic miracle in Pakistan.

But there are questions over Pakistan's ability to absorb this investment given its chronic problems with militancy, separatism, political volatility and official corruption. China is worried about violence from ethnic Uighurs in its mostly Muslim north-western Xinjiang region and fears hard-line separatists could team up with Uighur militants fighting alongside members of Pakistan's Taliban.

$46 billion! Even $4.6 billion a year would have been mighty impressive in light of the funds provided by the World Bank and other institutions of American hegemony. You have to wonder though if strife-torn Pakistan has the absorptive capacity to productively use so much capital being injected in so little time.

Given Pakistan's history of uncontrolled corruption and insurgency, it may ironically be this country that makes China more aware of the needs for good governance if it turns out that it is throwing away good money after bad on a country that's proven to be a bottomless money pit since its independence. In that case, it would begin to act like any other international lender.

Will Malala Attend My Uni (Across Her High School)?

♠ Posted by Emmanuel in Education,South Asia at 10/28/2014 01:30:00 AM

Edgbaston High School for Girls is literally a stone's throw away.

I obtained my doctorate in Political Science way back in 2008 at the University of Birmingham, in the UK's second largest city by population. A year before that, I began writing this blog which still survives (and thrives!) somehow. Despite three or four changes of academic affiliation since, the blog lives. However I am not exactly the most famous person associated with Birmingham, writing a blog in a somewhat obscure academic discipline. After being shot by crazed Taliban assassins in Pakistan while on board a school bus, Malala Yousafzai became a heroine to women being persecuted for desiring an education. A few days ago, she became the youngest Nobel laureate for winning the Peace Prize at age 17. It's a feelgood story Westerners like.

Going home being deemed to dangerous, Malala has since resettled in Birmingham, UK. I was of course aware of this, but what I was not aware of was how Malala is attending secondary school near the campus of the University of Birmingham at Edgbaston High School.

Pakistani schoolgirl Malala Yousafzai, who was shot in the head by the Taliban after campaigning for girls' rights to education, has attended her first day at school in the UK. The 15-year-old was shot on a school bus in Pakistan in October. She has now recovered following treatment at Birmingham's Queen Elizabeth Hospital.

She described starting at the city's Edgbaston High School for Girls as "the most important day" of her life. She said: "I think it is the happiest moment that I'm going back to school, this is what I dreamed, that all children should be able to go to school because it is their basic right. "I am so proud to wear the uniform because it proves I am a student and that I am living my life and learning." Malala is in year nine and will start her GCSE curriculum next year. She said she was looking forward to learning about politics and law.

Those of you who've been to Brum (our affectionate nickname for the town) know that Edgbaston is the more upscale, tonier part of the rather expansive University of Birmingham campus. The other part, Selly Oak, is the more--how do I put this--proletarian part of town. It is also where I stayed in student residence. One of the more curious memories I have about its location is that a fellow student from Pakistan also staying at Jarratt Hall was concerned about the security situation there [!] But hey, don't feel too sorry for us; another resident loved it so much that he's titled his latest trance album after our beloved student residence.

At any rate, the University of Birmingham was named "University of the Year" in 2013-2014. It's been trying to drum up attention in recent years and increase its academic rankings in the process--we're one of the world's top 100 universities in most surveys. Malala should consider that our rankings for the disciplines she's interested in are not too shabby, either: Brum ranks 13th in Political Science and 17th in Law.

Certainly, there's a hard-nosed persistence bred through living in a city lacking glamor--think of it as the Houston of the UK and you wouldn't be far off the mark. Yet, we thrive. It would also complete the circle for Malala: she received treatment for her injuries at the Queen Elizabeth Hospital on campus grounds and attends high school across the grounds of the aforementioned university. The only thing left for her is to study law or political science at the University of Birmingham ;-)

Bhutan, Gross National Happiness & Human Rights Issues

♠ Posted by Emmanuel in South Asia at 4/30/2014 12:07:00 AM

Oh my, I hereby declare April 2014 "Bash Bhutan Month." Having criticized the small country for catering to wealthier tourists via its minimum spend requirements to obtain a visa despite purportedly pursing anti-materialistic "gross national happiness," I offer another criticism along similar lines. Rest assured that I feel guilty pointing out Bhutan's flaws since it's but a small developing country. However, just as I regularly bash Yanqui blowhards over hoary American exceptionalism--us stupid colored people would be so much better off if we were more like the US--Bhutan also has it coming with all this "gross national happiness" jibba-jabba.

Like other countries, Bhutan has its ethno-religious minorities. Almost without exception, they bear grievances. Think of Tibetans in China, or Muslims in the Southern Philippines and Southern Thailand. In Bhutan, there are the Hindu Lhotshampa people who compose a fifth of the population but are not exactly treated on the same basis as the Buddhist majority. First, a bit of sordid history:

In the 1980’s Bhutan changed its citizenship laws, especially in relation to Lhotshampa citizenship. At the time the Lhotshampa comprised roughly on third of the population, posing a possible threat to political order. By 1990, government policies became more repressive for the Lhotshampa and they fled as refugees from the government’s actions or were expelled as their citizenship was proclaimed illegitimate. The Lhotshampa’s sudden expulsion left Bhutan with abandoned villages, an injured farming base, and international criticism. A few Lhotshampa still remain in Bhutan, yet face discrimination as a marginalized, minority ethnicity.

Anyway, to frame today's discriminatory measures, we begin once more with other countries' uncritical admiration of "gross national happiness" happy talk:

Many nations, including Japan and Canada, have expressed aspirations to emulate GNH, which shuns purely economic yardsticks like gross domestic product (GDP), on the assumption that the policy has resulted in Bhutan’s people being happier than elsewhere. But happiness goes hand-in-hand with human rights. So does Bhutan really have respect for human rights?

I was peripherally aware of Bhutan's minorities before; what I was unaware of was the extent of the discrimination against them. Indeed, there is even a caste system in place that limits their freedom of movement:

Among the main stakeholders in these [UNHCR] recommendations were the “Lhotshampas,” as Bhutan’s southerners are called. They are part of the nation’s ethnic Nepalese minority. While some of them have risen to become ministers, many others do not even have full citizenship rights.

The citizenship ID cards the Ministry of Home and Cultural Affairs issues to them contain seven categories. Category 1 is for “genuine Bhutanese citizens.” Category 2 is for southerners who left Bhutan once and then returned; 3 is for those who were not around when the 1988 census was held; 4 refers to non-national women married to Bhutanese men, and their children; 5 is for non-national men married to Bhutanese women, and their children; 6 is for legally adopted children. And category 7 would mean the card holder is a non-national.

Holders of cards in categories other than 1 and 4 normally do not get the security clearance required for a passport. They cannot get voter ID cards either, which mean they cannot vote. Worse, those who carry category 7 cards, or fall in that category – and there are significant numbers of them – cannot get admission into schools or get government or corporate jobs. They find it difficult to travel even within the country – they get a “route permit” for restricted domestic travel.

I hate to disabuse you of illusions, but Bhutan isn't quite a Magic Kingdom that's a true-to-life happiest place on earth. Like nearly every other country, it has issues with racism and discrimination against ethnic minorities. The reason why it gets the stick is because, unlike most other countries, it makes grandiose claims about making everyone happy. Just like American hypocrisy on strong dollar policy, Internet freedom or any sort of risible, self-serving happy talk they keep coming up with, Bhutanese leaders need to understand how the rest of us see it. In either case, don't drink that Kool Aid so readily.

To paraphrase Imelda Marcos, I guess some people's happiness matters more than that of others.

US Mess, EU's Problem: Refugee Crisis at Sea

♠ Posted by Emmanuel in Africa,Americana,Europe,Migration,South Asia at 1/03/2014 01:16:00 PM

Did US interference make their lives any better? Take a guess...

For many people in conflict zones, the coming of the year 2014 is hardly "new," let alone "happy." The depressing truth as we begin another calendar year is simply that various messes the white man has contributed to are in no way sorted out, and that foreign adventurism--especially the so-called "war on terror," is not yet finished.

We are all familiar with friends who like getting into you trouble. A few drinks for them and they become belligerent. The archetypal "friend" that fits into this mold is the United States as it engages in drunken outbursts that implicate others. As it so happens, Italian authorities have been faced with a huge refugee crisis at the start of 2014 as a "greatest hits" of American foreign policy failure has come to roost on their shores. This has been ongoing for a number of years, but the volume is unprecedented. Egypt, Pakistan and Iraq are classic sites for Americans sticking their noses when they don't belong, while Tunisia indirectly implicates the US via the latter's championing of the overthrow of undemocratic leaders. As it so happens, folks are wishing to flee these places. I guess the freedom 'n' democracy shtick BushBama keep yakking about didn't pan out. Wonder why...

The Italian navy rescued more than 1,000 migrants in the 24 hours to Friday from boats trying to reach Europe, authorities said, as an immigration crisis that killed hundreds in the last year showed no signs of easing. Navy helicopters spotted four overcrowded boats struggling to stay afloat south of Sicily on Thursday and ships were sent to save them, the navy said in a statement. The 823 men, women and children aboard the four vessels were from countries including Egypt, Pakistan, Iraq and Tunisia.

Over the past two decades, Italy, Greece and the Mediterranean island of Malta have the brunt of the migrant flows [being the nearest EU countries, especially to North Africa] and have urged a coordinated European Union response.

Part of Europe's solution to this post-GWOT refugee crisis, I believe, is "make America foot the bill." Let me ask you this: would the people of Egypt (where people keep dying due to political conflict), Pakistan, Iraq and Tunisia (ditto for all three) say they are better off now than before the US-led global war on terror commenced? Somehow, I don't think many will agree as evidenced by the number of folks fleeing these playgrounds for Yankee interference.

Make no mistake; things are getting worse in these places.

The Washington Consensus Lives On In Pakistan

♠ Posted by Emmanuel in Development,South Asia at 11/10/2013 08:38:00 AM

There is a photo essay on American shopping malls that I found quite amusing on Yahoo! featuring pictures taken by an obviously obsessive chap who took lots of them during that era of high consumerism, the Eighties, entitled "Big Hair, Smoking, and Record Stores." While the IMF now styles itself as not your grandpa's IMF in being a kinder, gentler lender of last resort, I had a distinct 45 RPM retro flashback while reading its latest press release concerning its recent staff mission to Pakistan (where they are not quite fond of Yanquis).

Much as the IMF would like to say otherwise, it seems we have not yet gotten away from the greatest hits of one-size-fits-all quite yet. Liberalization, privatization, deregulation...structural adjustment austerity....is there anything new?

Structural adjustment:

The mission was also pleased with the strong fiscal performance in the first quarter of 2013/14 and the steady implementation of the government’s structural reform agenda...

Belt-tightening:

Fiscal consolidation remains a key component of the government’s economic reform program. The mission was encouraged by the government’s efforts to enhance tax revenues, which slightly exceeded the program target level.

Privatization:

The government is moving forward with the privatization or restructuring of 31 public sector enterprises to improve public sector resource allocation and limit poor performance.

Liberalization:

The authorities are also working towards significant structural reforms in the areas of trade and the business climate to encourage higher investment.

Everything old is new again, and I am afraid that we have not quite gotten into the New Wave, let alone the Alternative era at the IMF since the song remains the same. Is that doom metal? Would you like to, ah, break dance?

IMF Returns; Will Pakistanis Hate US Even More?

♠ Posted by Emmanuel in IMF,South Asia at 10/13/2013 01:28:00 PM

I entitled an earlier post about Pakistan, the US and the IMF "When Cash & Hate Collide." To underline that assertion, here's Exhibit A: In a recent Pew Global Attitudes poll, the country which assigned the lowest favorable opinion rating to the United States was--wait for it--Pakistan at a ridiculously low 11% [click for a larger image]. It even outdoes places where Amerihatred is keenest based on current events alike Egypt and the Palestinian territories. As for the cash part, in case you haven't read about it, Pakistan recently inked another IMF bailout for $6.6 billion. That's its eighth--that it not a typo--since 1988. Talk about a state of perma-crisis.

Recently I assigned US-Pakistani ties as a term paper topic to my students. They are well aware of what binds these two reluctant "allies": the danger of a failed nuclear state, the constant Taliban menace, and the strategically advantageous location of this country. The truth is that no matter how badly Pakistan mismanages its economy, the US through the IMF will always come to its "rescue":

In 2008, Pakistan agreed to an $11.3bn loan from the IMF to avert a balance of payments crisis. It received $7.6bn but failed to get the remaining $3.7bn because of its slippages in meeting the performance criteria. That led to the suspension of the programme in May 2010. The programme was extended in December 2010 for nine months, but disbursements were not resumed because of the country’s failure to take fiscal measures as demanded by the IMF. Ironically, Pakistan has availed itself of the new $6.6bn loan to repay the old loan to the IMF of which about half – some $4bn – is outstanding [my emphasis].

From where I come from, borrowing to repay previous borrowing is called a "Ponzi scheme." Whether the IMF does more harm than good is an open question as the IMF readies fairly harsh conditionalities once more. That said, there is hardly reason to believe that Pakistan can work its way out of trouble on its own despite the constant IMF debt overhang. Misplaced subsidies, huge budget deficits, moribund investment, next to non-existent FDI, lack of basic law and order in most places...Pakistan has almost all the negatives humanly possible.

But, going back to the title of the post, can Pakistan be made to hate the US even more after unauthorized incursions via drone strikes, bin Laden strikes, perceptions of IMF neo-imperialism and so on? You can argue that America's 11% favorable rating has nowhere to go but up. I actually expect that it will in the near future as a "dead cat bounce" phenomenon.

As for IMF lending, I expect the same cycle to repeat itself as it has eight times over the last few decades: Pakistan will try to comply for a while with IMF conditionalities but eventually decide the political price of obsequiously bowing to this American hegemonic institution are too high. After all, if there's a better scapegoat for Pakistani perma-crisis than the IMF with its 11% approval rating by proxy, I don't know what is. Who's more masochistic here, Pakistan or the IMF? Beats me, pal.

Literally Dying for 2022 World Cup: Migrants in Qatar

♠ Posted by Emmanuel in Middle East,Migration,South Asia,Sports at 10/06/2013 10:31:00 AM

Just when you thought Qatar's 2022 World Cup could not get any more controversial after continuing debates about the procedure used to select the tiny state and the difficulties associated with hosting the event during the peak of summer in the desert, there's more: It is common knowledge that the bulk of Qatar's workforce is composed of migrants who do the 3-D (dirty, dangerous, difficult) while its few citizens enjoy air-conditioned insulation from the harsh desert environment. However, recent reports have brought to light just exactly what the human cost is on migrant workers.

The Guardian got--pardon the expression--the ball rolling by reporting on the death toll of Nepalese workers due to poor living and working conditions out in the blast furnace of the Arabian desert to put up mega-stadiums in time for the 2022 event:

This summer, Nepalese workers died at a rate of almost one a day in Qatar, many of them young men who had sudden heart attacks. The investigation found evidence to suggest that thousands of Nepalese, who make up the single largest group of labourers in Qatar, face exploitation and abuses that amount to modern-day slavery, as defined by the International Labour Organisation, during a building binge paving the way for 2022.

According to documents obtained from the Nepalese embassy in Doha, at least 44 workers died between 4 June and 8 August. More than half died of heart attacks, heart failure or workplace accidents. The investigation also reveals:

• Evidence of forced labour on a huge World Cup infrastructure project.
• Some Nepalese men have alleged that they have not been paid for months and have had their salaries retained to stop them running away.
• Some workers on other sites say employers routinely confiscate passports and refuse to issue ID cards, in effect reducing them to the status of illegal aliens.
• Some labourers say they have been denied access to free drinking water in the desert heat.
• About 30 Nepalese sought refuge at their embassy in Doha to escape the brutal conditions of their employment.

Der Spiegel then added fuel to the fire by suggesting that Indian workers are also dying of exploitation out in the desert so that the 2022 show may go on:

There are many indications that the 44 dead Nepalese are no exception. Following the revelations in the Guardian, the Indian ambassador reported that 82 Indian workers had died in the first five months of this year, and noted that 1,460 Indians had complained of poor working conditions. The International Trade Union Confederation [ITUC] fears that up to 4,000 workers could die in Qatar before the starting whistle is blown for the first match -- that is, if working conditions don't change.

The 4,000 worker deaths are an extrapolation of the current rate of fatalities being incurred by South Asian workers in Qatar over ten years. Moreover, ITUC argues that Qatar's efforts are in vain since the structure of migrant construction labor is fundamentally abusive:

"The labour inspection system in Qatar has failed, and the government's announcement would simply add some inspectors into a system that doesn't work and will not make a difference," said Sharan Burrow, the ITUC general secretary. "Workers are not able to speak freely as, under the strict visa sponsorship system, employers retain their passports and they are not allowed to change jobs or leave the country without the employer's permission."

Alike nearly all other migrant-receiving states, Qatar has not signed up to the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families. Hence, Qatar's critics are applying pressure on Qatar being a signatory in another ILO convention concerning forced labor:

Qatar is failing to fully implement an international convention banning the use of forced labour ahead of the 2022 football World Cup, the United Nations' International Labour Organisation (ILO) has warned. Azfar Khan, the ILO's senior labour migration adviser in the Arab states, told the Guardian that despite pledges to do otherwise Qatar did not properly inspect workplace conditions and there was "no coherence" in the state's policies over the use of migrant labour.

"The onus is on the Qataris if they have ratified the convention to better implement it," he said. "Many of the abuses that take place which can lead to forced labour are still happening."

It is turning out to be a fiasco not only for football organizers but also for Qatar. The latter's image is receiving a battering that it's hard to imagine it will recover from in nine years' time. Isn't improving national reputation the goal of the whole enterprise? Qatar seems to be losing sight of it very badly.

Michael Pettis Should Read More, Blog Less

♠ Posted by Emmanuel in China,Currencies,South Asia at 12/13/2012 10:45:00 AM

Skip the maths, will ya?

I have in the past tied Michael Pettis to the whipping post for uncritically accepting Bernanke's self-serving notion of a "global savings glut" amidst falling levels of savings worldwide and a fantasyland assertion that the US household savings rate would hit double digits. It didn't, and I still don't quite understand why someone who keeps making factually inaccurate statements and predictions remains popular. If you read blogs to keep ahead of the curve of mainstream media or to understand the antecedents of various economic events, well, I would not be so sure about that if you are a regular China Financial Markets reader.

I do not like to keep doing this, but he has done it again (and again and again). In a recent blog, he takes Arvind Subramanian and Martin Kessler to task for their argument that there is a "yuan bloc" emerging in East Asia. The PIIE authors base this argument on movements of several regional currencies covarying more with the Chinese yuan and less with the US dollar. However, Pettis argues that this argument is artifactual:

Well actually you can argue with the math, or at least you can argue with the interpretation of the math. There are alternative – and much simpler, I think – explanations for the increased “co-movement”, and these do a much better job, I think, of explaining what is happening than reserve currency displacement.

Assume for a moment a global scenario in which the largest exporter of manufactured goods in the world has a significantly undervalued currency. Assume further that many of its competitors also have undervalued currencies, and would like to revalue in order better to manage their domestic monetary policies. Assume finally that the world is in crisis, and exporting nations are having trouble maintaining the necessary growth rate of their exports, so they cannot allow their currencies to rise faster than that of their main export competitors.

In this scenario which currency would the currencies of the smaller exporting countries track, the US dollar, or the undervalued currency of the largest and most competitive exporter of manufactured goods in the world? Almost certainly the latter, right? The smaller exporters would want their currencies to rise, but the rise in their currencies would be limited by the rise in the currency of their largest competitor. This would happen not because they are tracking a new reserve currency but only because they are in export competition with that currency.

That is all well and good if Subramanian and Kessler didn't bother to consider this scenario as Pettis clearly suggests, but they did. On page 11, the PIIE boys write:

i. Is the RMB bloc related to trade integration with or competition against China?
A currency could co-move with the RMB because it is integrated with China in terms of common supply chains. A related but distinctly different reason for co-movement could be if policy targets the RMB because countries do not want to lose competitive advantage vis-à-vis Chinese exporters and domestic manufacturers. In other words, the reason for the co-movement could be competition against rather than integration with China.

How can we distinguish the two? One way of measuring competition is to see if a country exports products similar to China’s. Mattoo, Mishra and Subramanian (2012) develop such an index of competition relative to China. Unfortunately, they compute this index for fewer emerging market countries than contained in our sample.

When we introduce this index of competition (which is country-specific), it has consistently the right sign (the more a country competes with China, the more likely its currency to track the RMB). But is not consistently significant in a statistical sense (in Table 6, the index is statistically significant in column 2 but not in column 1). And when we run a horse race between this competition variable and a pure integration variable, the latter consistently trumps the former. So, the evidence, albeit limited, favors an explanation for co-movement that is more related to trade integration than competition, although a role for the latter cannot be ruled out. One reason for that last caveat relates to the findings reported in Table A6. It seems that outside East Asia, more countries track the RMB when it depreciates than when it appreciates. Moreover, the average magnitude of the CMCs outside East Asia more than doubles in such instances. So, we cannot rule out entirely a competitive pressure motivation for currencies to track the RMB.

PIIE boys did their homework, period. Some points:

I don't know why Big Name Authors think they can get away with such sloppy writing;
My policy of not having a comments section is vindicated by the echo chamber over at Pettis' blog. 59 comments...and not one who points this out either. I guess the Pettis Fan Club takes his word for gospel truth for better or worse--rather worse here;
I'm afraid that this is another example of inept blogging. Pettis writes--and he sure does write with posts extending to thousands and thousands of words--but he clearly doesn't do so from a position of knowledge of the material he himself links to;
This demonstrates why some quantitative analysis skills are worth learning for those interested in the subject matter. How do you measure covariance? How can alternative variables be included in models to account for alternative hypotheses? Pettis is a poet with limited numbers chops, so this probably explains his lack of awareness about such things. Do the math.

Note to Mike: If you link to something, at least try to understand what you're criticizing. I am not convinced that the yuan is going to take over as the world's dominant currency soon either, but I think it's at least worth trying to understand the arguments of Subramanian and Kessler before criticizing them for faults they didn't commit.

Geography Flunkies? Pakistan Wants to Join ASEAN

♠ Posted by Emmanuel in South Asia,Southeast Asia at 6/26/2012 01:10:00 PM

Of the few opinions I share with George W. Bush, I have long argued that Turkey should be allowed to join the European Union. You know all of the counter-arguments: Turkey is a security risk because it shares borders with Iraq and Syria. Turkey is a dominantly Islamic country, whereas most European nations share a Judeo-Christian tradition. Turkey is a populous nation whose EU membership might see a tsunami of migrants heading for European states. And so on and so forth.

While many of these concerns can be legitimately discounted, I never thought that I would face a similar conundrum in our part of the world, Southeast Asia. Of all the darndest things I could possibly read, how about Pakistan wishing to join ASEAN? On the occasion of predominantly Islamic nations Indonesia and Pakistan signing a (rather limited) FTA, the head of Pakistan's largest chamber of commerce suggests his country is very much interested in this possibility:

Pakistan wants to join the Association of South East Asian Nations (Asean) and Indonesia should support it in its endeavour, Karachi Chamber of Commerce and Industry (KCCI) President Mian Abrar Ahmad said in a statement on Monday.

There are many difficulties here. Being a Citizen of the World, I of course have no objections to Muslim nations in ASEAN, for population-wise it is already predominantly composed of citizens of Islamic states. Aside from populous Indonesia, you also have Malaysia and Brunei in ASEAN. That said, consider the following impediments:

Geographically speaking, Pakistan is in South Asia, not Southeast Asia. More specifically, it is on the Indian subcontinent. It certainly doesn't share borders with any Southeast Asian nation since it lies west of India;
Pakistan is (logically) already involved in regional groupings in its part of the world, notably the South Asian Association for Regional Cooperation (SAARC) and the Economic Cooperation Organization (ECO) with lots of its neighbouring 'Stans and a smattering of Middle Eastern states. Both SAARC and ECO already have their own regional integration efforts, so I don't exactly see why joining ASEAN makes sense. While the latter's integration project may be further along in a number of respects, Pakistan's advantage with SAARC and ECO is that it's no Johnny-come-lately to them and thus has more leeway in determining the form of integration as they proceed.
Counting on the support of your co-religionists is hardly a sure-fire thing in ASEAN. Recall that Timor Leste has long relied on the Philippines to get the predominantly Roman Catholic nation into ASEAN, but to no avail as of yet.

So, while I certainly don't have any grudges against our Pakistani friends, I would strongly suggest that they make the most out of the regional groupings they already belong to instead of reinventing geography as we know it.

UPDATE: Before I forget, there is precedent for Pakistan being (mis)classified in a Southeast Asian grouping. Witness the "Southeast Asia Treaty Organization," composed of, erm, the United States, France, Great Britain, New Zealand, Australia, the Philippines, Thailand and Pakistan. Originally intended to be a mutual defence arrangement alike NATO, it never really took off and was disbanded by 1977. Here is the US State Department explaining away the presence of extra-regional participants--including Pakistan:

Most of the SEATO member states were countries located elsewhere but with an interest in the region or the organization. Australia and New Zealand were interested in Asian affairs because of their geographic position in the Pacific. Great Britain and France had long maintained colonies in the region and were interested in developments in the greater Indochina region. For Pakistan, the appeal of the pact was the potential for receiving support in its struggles against India, in spite of the fact that neither country was located in the area under the organization's jurisdiction. Finally, U.S. officials believed Southeast Asia to be a crucial frontier in the fight against communist expansion, so it viewed SEATO as essential to its global Cold War policy of containment.

That was back when the US suspected India of having the potential to fall under the Soviet ambit given its then-closer ties to the USSR than the US. Note though how this was a security arrangement, not an economic one. Then again, it demonstrates the US is not exactly a stranger to convoluting geography for its pet projects even today.

When Cash & Hate Collide: Frayed US-Pakistan Ties

♠ Posted by Emmanuel in IMF,Security,South Asia at 9/29/2011 12:14:00 PM

OK, so I had to think of a hackneyed title to describe an even stranger relationship. In general public consciousness--especially that of America--Pakistan emerged on the world stage in the wake of the 9/11 attacks. If not wholly supportive of the Taliban regime in Afghanistan back then, it was at least tolerant of its existence. By throwing wads of cash ("foreign aid") to curry Pakistan's favour, then-leader Pervez Musharraf famously switched allegiances to become a global warrior on terror--though his country's ultimate loyalty has remained in question. Since then, Pakistan has encountered several upheavals--the return of former leader Nawaz Sharif from exile, the killing of Benazir Bhutto and the subsequent election of her controversial husband "Mr Ten Percent" Asif Zardari.

All the while, Pakistan's economy has not exactly been a paradigmatic example of South Asian growth. In the wake of the global financial crisis, it did once more what it's done before in taking out an IMF standby agreement. With the consequences of a full political meltdown in a nuclear power potentially rather severe, the West ponied up quite quickly.

Fast forward to today and we have had interesting developments in this exercise in political economy. On the political side, we've had Pakistan complaining mightily about US excursions into its territory--especially that which eliminated Usama bin Laden. (Nevermind owing the US an explanation as to why he was sheltered in Pakistan's capital for the longest time, but territorial sovereignty does matter.) On the economic side, let's just say that Pakistan has, alike during previous bouts of IMF borrowing, failed to meet IMF conditionalities. This time around, failures to improve revenue collection are the culprit. The Pakistan News Service has the lowdown on this repeat borrower's history of, er, repeatedly borrowing without successfully escaping the need to do so. IMF lending to Pakistan is almost a mini-history of lending fashions at the institution:

Pakistan and the International Monetary Fund (IMF) will end [their] 12th loan programme, tag[ged] unsuccessful after 11 out of total signed loans of 18 in [the] last 53 years history of relations between two sides as Islamabad got [its] first loan programme from the Fund in 1958. The existing Standby Arrangement (SBA) programme will again repeat the old history as it is going to expire on September 30, 2011, on [an] unsuccessful note under which Islamabad failed to draw [the] last two tranches of $3.4 billion.

Pakistan’s history of using IMF resources can be divided into three distinct phases. In the first period—1970 to 1988—Pakistan had four one-year SBAs followed by one three year Extended Fund Facility (EFF). The special characteristics of this phase were (a) with the exception of two, [the] rest of the SBAs were fully disbursed, (b) there was little emphasis on structural reforms (except in EFF), and (c) repeated approach to Fund resources, in between periods of break.

In the second period, 1988 to 1999, Pakistan had both the short term and multiyear arrangements with the IMF. Unlike the first phase, these arrangements emphasized on variety of structural reforms along with demand[s on economic] management policies. Almost all the arrangements went off-track sooner or later on account of policy slippages. As a result, throughout this period Pakistan was continuously under one or [an]other IMF programme.

In the third period, 2000-2004, Pakistan availed one facility of SBA and PRGF [Poverty Reduction and Growth Fund] each. These arrangements were completed successfully as Pakistan met most of the structural performance criteria. With the recovery from macroeconomic crises, Pakistan exited from IMF programme in 2004.

The article then goes on to describe various IMF loan programmes since independence; more recent activity can of course be found on the [extensive] Pakistan pages on the IMF site.

In any event, disagreements over security have worsened with the US in the process of cutting off aid to Pakistan over sundry disagreements about how these monies have been used. Matters have come to a head over American incursions into its territory at the same time Pakistan has been unable to meet aforementioned conditionalities to avail of further disbursements of IMF cash. And don't forget that the less-than-transparent Pakistani intelligence service ISI has been accused by Admiral Mullen, outgoing chairman of the US Joint Chiefs of Staff, of coddling the allegedly terroristic Haqqani network. (Various political parties are now in the process of addressing this serious accusation.)

So the US and Pakistan don't quite get along. But what are the economic costs if Pakistan indeed goes it alone? The Express Tribune has some ideas:

The signals are indeed dire. The powers that be, above and beyond Prime Minister Gilani, had already spoken to break the heart of the business community: Pakistan was ready to take the consequences of its embrace of the Haqqani network and that it was the US that would suffer after losing Pakistan as an ally. As for the break with the IMF — after Finance Minister Abdul Hafeez Sheikh could convince neither the MQM [coalition partners] within the government nor the PML-N in the opposition to implement the RGST (Reformed General Sales Tax) — it threatens the economy with ‘dollarisation’ and rampant inflation already standing at a level higher than any other South Asian economy. What the businessmen wanted was probably not within the grasp of Mr Gilani. They were of the opinion that if the US was to be defied and if the umbrella of the IMF was to be removed, then they could hold up their end of the bargain provided that law and order was restored...

The pacification of Karachi is a long way off and may be overtaken by other crises triggered by the tiff Pakistan has picked with the US, to provide temporary emotional relief to the country’s intensely anti-American population. What the Gilani government is doing will not serve to bolster the confidence of the business community in Karachi. The army chief has not denied that the Haqqani Network is alive and well in Pakistan but has claimed that a lot of other countries in addition to Pakistan were maintaining contact with a militia of Taliban that controls 13 of Afghanistan’s 34 provinces. And Mr Gilani has delivered the most telling blow by saying: “America can’t do without us; it should stop sending out wrong messages.”

The end result may just be capital flight as the already-thinned business community in Pakistan flees:

No prizes, therefore, for predicting that the businessmen of Karachi will soon start saving their money and assets from being devalued by fleeing to other markets in the neighbourhood. It would be fair to say that the next few months or more will be uncertain to say the least, and that the consequences of a permanent break with the Americans could be severe on Pakistan’s economy.

To be honest, Pakistan's security services are at least as duplicitous as Westerners who've deservedly earned Pakistan's ire through the years. The ISI is as much of an obstacle to Pakistani development as foreign intervention. Unspeakable as it may be to many Pakistanis, could the alternative to coddling Americans actually be worse? There is much talk that a chastened Pakistan will soon be currying US favour once more given few alternatives and a moribund economy. Most of its "record" $18B reserve holdings f'rinstance are attributed to foreign donors the country is currently keen on ridding itself of.

Pakistan has been the mother country of many great minds; it does sadden me how it has been unable to sort things out at home so it can move forward alike its neighbours in India. Despite also having highly contentious and often violent politics, the latter has somehow managed to improve its situation in a way Pakistan has yet to find.

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As an aside, those all-purpose saviours the Chinese are being mooted for picking up the slack in lending to Pakistan.

US-Pakistan Ties Through the Lens of Pax Britannia

♠ Posted by Emmanuel in Economic History,Hegemony,South Asia at 5/18/2011 12:01:00 AM

Would you like to see Britannia rule again, my friend?
All you need to do is follow the worms

[NOTE: With ex-Pink Floyd member Roger Waters currently playing the London leg of his globetrotting revival of The Wall, I guess this post is apropos. There are reasons why I've included a clip of Sir Bob Geldof in imperial mode from the film version of The Wall.]

It isn't news that already shaky US-Pakistan ties are under further pressure with the extrajudicial and extraterritorial elimination of Usama bin Laden. While you can certainly debate whether the intrusion was justified, this much is clear: Pakistan greatly resents the United States despite being quite dependent on it for aid, the IMF bailout, security cooperation and the rest. While we can debate American hegemony till the cows come home, there is little doubt that its economic and military heft is being felt by the Pakistanis. And, as many American commentators note, there has not really been all that much gratitude for US "largesse." You have Pakistani forces now shooting at NATO helicopters making excursions from nearby Afghanistan to avoid Usamagate II. Meanwhile, the Pakistani press is getting even more strident about American interference in its affairs.

Call it biting the hand that feeds what other provide. I'd argue, after all, that it's the Chinese ultimately lending to the Americans to lend to and supply the Pakistanis if we are more honest about this messed up world of subprime globalization. Pakistani PM Yousuf Raza Gilani has even called China his country's best friend in a reflection of strained ties with the US. Take that, Yanquis; some fine reward for all your troubles.

If you think US-Pakistan ties are frayed, roll back the years, decades, and centuries to the heyday of Pax Britannia for an even more uncomfortable relationship in the United Kingdom and Pakistan. While Pax Americana has not been formal in name--its tradition is ostensibly small r republican--Pax Britannia in all its majesty held sway over Pakistan at the height of its powers. Just as the visit of Senator John Kerry occasioned a lot of anger in Pakistan, it was only a few weeks ago that a representative of the erstwhile imperialist in Prime Minister Cameron visited Pakistan. Instead of urging further cooperation on anti-terrorism and so forth, I think Cameron actually did something smart by attempting to jettison some of the historical baggage.

You see, Cameron was caught on camera attributing a lot of what's wrong in Pakistan today to British colonial rule. By the measure of how the maps of today's regions look like--particularly in Africa and the Middle East--you can certainly argue that the British Empire has had a more profound effect on the modern world than the Americans ever did. Hence the unfinished business in places alike Afghanistan, Pakistan, and Iraq. Historical reappraisals of British Empiretend to go in cycles. Our own Niall Ferguson is of course of the opinion that yes they were often racist and killed/brutalized/enslaved us coloured peoples, but overall, they had a positive influence on the development of the modern world.

However, what Cameron did was, as far as I can observe, a more politically tactful ploy since he was received better than Kerry was. Indeed, British traditionalists were quickly up in arms against what they saw as the latest apologia for empire:

David Cameron has been criticised for being “simplistic and trendy” and for being “more PC than PM” for trying to apologise for Britain’s imperial past. Historians also said he was being naïve to suggest that many of the world’s ills can be traced back to when they were British colonies.

Seán Lang, a senior lecturer in History at Anglia Ruskin University, where he teaches British Imperial History, accused Mr Cameron of “touting for applause”. He told The Daily Telegraph: “His comment was simplistic and trendy - more PC than PM. I certainly wouldn't accept such a sweeping generalisation from one of my own students. “Perhaps the Prime Minister should spend a bit of time over Easter back at Eton, where the very strong history department could quickly put him right.”

The Prime Minister risked controversy when he appeared to blame Britain for the conflict in Kashmir and many other international disputes during a visit to Pakistan. Asked how Britain could help end the row over Kashmir, he insisted that it was not his place to intervene in the dispute, declaring: “I don’t want to try to insert Britain in some leading role where, as with so many of the world’s problems, we are responsible for the issue in the first place” [my emphasis].

Mr Lang said the Prime Minister’s comments showed why “people in public life need extensive, detailed and accurate historical knowledge, and why the seed of this needs to be sown in the school classroom”. He said that while Britain’s hasty withdrawal from India in 1947 certainly led to the Kashmir dispute, blaming the British overlooked “notably the heightening of inter-communal tensions between Hindus, Sikhs and Muslims”, he said.

Britain’s empire was a “multi-faceted phenomenon”, he said, which “cannot simply be categorised as ‘good’ or ‘bad’”. Mr Lang said that “even historians very critical of British imperial rule recognise that it also left considerable benefits.

In an odd twist, it turns out that Cameron meant this solely for Pakistani consumption, not British (although he probably had little fear of losing his invitation to the royal wedding). In fact, he's said to have directed some f-bombs in the direction of the reporters who made light of this slagging of Pax Britannia in Islamabad:

David Cameron swore angrily on the plane journey back from his trip to Pakistan after he learned of the row caused by his comment that Britain is to blame for many of the world’s problems.

The Prime Minister turned on a journalist who had reported his remark and said, ‘You f*****!’. The outburst came after Mr Cameron’s apparent attempt to distance himself from the UK’s imperial past had received a warm welcome from his audience in Pakistan.

The mixed legacy of British Empire continues to shape our world. However, I do think that despite being received poorly at home by some, Cameron's attempt at humility went down much better than did Kerry trying to lord it over the Pakistanis as if he were the new guv'nor. Having had much time to think what the loss of empire means, the British have a greater appreciation for the subtleties of winning friends and influencing people they did not necessarily have during their salad days.

With America waning, you'd hope it learns these skills, too. Lest we forget, others like the Chinese offer friendship with...fewer demands. At present, the US follows the worms.

An Update on Pakistan's Loan Prospects

♠ Posted by Emmanuel in Bretton Woods Twins,China,South Asia at 10/19/2008 04:46:00 PM

The fog of imminent default is producing inconsistent reports on Pakistan from various news sources. Earlier, I thought Pakistan would be successful in playing off two countries vying for regional influence against each other--the US and Pakistan. China now appears reluctant to make a large commitment to Pakistan, perhaps fearing that it may become another client state of dubious value alike North Korea. Hence, Asif "Give Me $100 Billion" Zardari and his new economic advisor, Shaukat Tarin, have drawn up a game plan for soliciting badly needed foreign exchange as the country encounters balance of payments difficulties. Unsurprisingly, the desirability of approaching various lenders varies according to the level of domestic political pain Pakistan must endure. In terms of increasing painfulness:

China is hesitant. Although it is famous for doling out cash with few preconditions to repressive regimes with abundant natural resources, Pakistan isn't too attractive to the PRC in that department;
The Islamic Development Bank, the UK's Department for International Development, the Asian Development Bank, and the World Bank have been approached by Pakistan. The nation's status as the world's second-largest Islamic nation after Indonesia makes the Islamic Development Bank a logical port of call. Meanwhile, Pakistan's status as a Commonwalth member may make some DfID funding available to it, although the UK's own financial mess may limit its abiilty to bankroll other cleanup operations. Regional lender the ADB and the World Bank also look set to help Pakistan out;
The International Monetary Fund is called the lender of last resort for a good reason. If Pakistan still comes up short in stabilizing its financial situation after approaching the above lenders, then it will have to borrow from the IMF regardless of the ultimate political cost. Though always controversial, its handling of the Asian financial crisis and follow-on episodes in Russia and Argentina have made the IMF appear even more penalizing from the point of view of many LDCs. It would surprise few if famed loan conditionalities involving belt-tightening and other domestically unpopular measures make a notable reappearance.

From Bloomberg:

Pakistan, perceived as the world's riskiest borrower, may seek the help of the International Monetary Fund to avoid default on its debt obligations, said Shaukat Tarin, financial adviser to the prime minister. The South Asian country may need as much as $6 billion to shore up its foreign-currency reserves after they dwindled more than 74 percent in the past year to about $4.3 billion. Pakistan has $3 billion in debt servicing costs in the coming year. Standard & Poor's, doubting the nation's ability to repay debt, cut the long-term foreign-currency rating on Oct. 6 to seven levels below investment grade, and said it may lower it again.

Pakistan may need as much as $4.5 billion to tide over the crisis and is working on a few plans, including seeking loans from the World Bank, the Asian Development Bank and U.K.'s Department for International Development, Tarin said in an interview today. ``If I don't feel the comfort level with the multilateral agencies and our bilateral friends in three to four weeks, then I'll have to write to the IMF,'' he said via mobile phone. A default is ``out of the question.''

A delegation from Pakistan will meet IMF officials in Dubai tomorrow and Oct. 21 for a ``routine economic review,'' he said. Pakistan has already presented its economic stabilization plan to the IMF, including removal of subsidies, tighter monetary policy and steps toward reducing the fiscal deficit, he said. ``If this plan is acceptable to them, only then we will have the IMF program,'' he said.

Pakistan's next interest payment on its dollar-denominated bonds is due in December and the government is scheduled to repay $500 million in February on a 6.75 percent note. Multilateral and bilateral aid may not be timely enough, S&P said on Oct. 6. Surging import costs widened the nation's balance of payments deficit, sending the local currency to a record low last week.

The current economic crisis is the deepest faced by the nuclear-armed nation since 1999, when it came close to defaulting on its debt and reserves plunged to less than $1 billion. Pakistan ended its three-year, $1.5 billion loan program with the IMF in December 2004. ``The balance-of-payments position is grim as some short- term obligations are coming up,'' said Syed Suleman Akhtar, an economist at Foundation Securities Pvt. in Karachi. ``There's been no concrete commitment yet.''

The global credit-market crisis triggered a capital outflow from emerging markets, with Pakistan's benchmark Karachi Stock Exchange KSE 100 Index losing more than a third of its value this year. The bourse kept trading restrictions in place and sought police protection to thwart a repeat of violence on July 16, when hundreds of protesters stoned the exchange and shouted anti-government slogans.

Pakistan faces the politically unpopular decision to seek an IMF bailout after China rebuffed its neighbor's request for cash, the New York Times reported yesterday. The U.S. and other nations are preoccupied with the financial crisis, and Saudi Arabia, a traditional ally, refused to offer oil concessions, the newspaper said. China may offer a soft loan of $500 million to the nation, the Financial Times reported, citing a finance ministry official it didn't identify.

Pakistan has sought about $1.5 billion from the World Bank, $1.6 billion from ADB and about 500 million pounds ($864 million) from the U.K.'s DFID, apart from a request for $500 million from the Islamic Development Bank, Tarin said.

The South Asian country's balance of payments deficit widened to the quarter to Sept. 30 to $3.95 billion from $2.27 billion a year earlier, while the current-account deficit reached a record $14 billion in the year ended June 30, according to data provided by the government.

Credit-default swaps on Pakistan's $2.7 billion of dollar- denominated bonds outstanding have more than tripled since August to 2,453.7 basis points, according to CMA Datavision. That means it costs $2.45 million annually to protect $10 million of the country's debt from default for five years. The cost reached a record $3.07 million on Oct. 6.