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Digital Pakistan Vision and the Challenges

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The world is going digital and countries hopping on the new platform are the ones reaping the benefits most out of it. Pakistani authorities have been working to achieve the goal but there are several challenges in acquiring a digital Pakistan.

Pakistan is among such fortunate countries where the youth population is 60% of the total population. This percentage of regular users of digital services such as digital payments or e-payments, internet access and professionals in smartphone world provide infinite opportunities to succeed in going digital.

It is the gigantic and innovative initiative taken by Prime Minister Pakistan to upgrade digital banking infrastructure and easing the conditions or requirements and exhausting paperwork to avail digital services such as e-payments, online transactions and the issuance of credit cards, and their use at Online stores i.e in-store shopping, Fuel fill-up at stations, online utility Bill payments and Universities Fee Payment  Gateways, but unfortunately, such easy and instant payment facility is currently available to Elite  Business class and involves too much  Paperwork, guarantees and regulations.

Government needs to overhaul the whole banking infrastructure and encourage businesses, retailers, Fuel Stations, PIA, Railways ticketing, superstores, schools, and colleges to introduce payment gateways and banks should offer credit cards to businessmen and especially to government employees since they will use such services when they run short of funds, falling prey to illegal Interest-based lenders who squeeze them financially and socially.

These banks there other banks that are issuing credit cards such as  HBL, MCB, ABL, Faisal Bank, Askari bank and JS banks. The average interest or Mark up charged   40% which is very high as compared to other countries

The innovative digital payments will remove their financial constraints and the funds will be utilized based on a credit limit for 45 to 51 days and the bills can be paid through salaries decreasing chances for collateral damage or any default.

It would be great to boost and promote digital services paving the way for International digital bigwigs i.e. Google, PayPal, Amazon, eBay, Yahoo, Alibaba Group, Alipay, Stripe and Apple to enter Pakistani financial markets specially the PayPal, eBay and Amazon are strongly required by Freelancers and authors to get their Payments processed.

At Present, only Skrill, Payoneer and Traditional IBAN/Swift code or wire transfers are available to Pakistan which is very costly, Time consuming having inflated fees of 10% to 30% plus  Bank charges of local Bank to process the amount. On the other hand, our neighboring country India has reaped the benefits digital world as the world’s best companies i.e. PayPal, Amazon and Google are serving the country with their innovative digital products and services.

By giving access to these Digital Payment Giants, Pakistan will open doors for  Foreign Direct Investment and it will also reduce the heavily demanded  Paper currency as  People avoid using cash and prefer to use their credit and debit cards at online stores, in-store shopping purposes.

Even Pakistan’s governance Model may go ahead with modernizing and upgrading the Reporting system, Complain Management, Receipts, and Payments, Public Sector spending through an electronic dashboard that will refresh automatically if any Development related or Public sector transaction takes place. Even governance could improve if governance Model is implemented by imparting pieces of training to Staff, Officers and Officials at the Federal, Provincial and District levels so that proper reporting channels may be built to ease the complicated process and ensure transparency.

The Sale and Purchase of properties and estate should be digitized and automated so that revenue records may reflect the history of Property owners to do away with any claim or objection. The Ownership certificates, Heirship certificates, Birth Certificates, Domicile, PRC and all other certificates should be generated online through developing software mobile applications of  Android or ios devices that will reduce the process and improve the productivity of the Public sector Institutes.

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The process of employees’ performance evaluation, superannuation and pension may also be automated so that the entire employment record will be available when they reach their point of promotion, superannuation or drawing pensions. The Personal IDs must be opened online through scale-wise Supervisors i.e. District Accounts Officers, Account Generals of Provinces and Accountant General of Pakistan so that trail may be available to track salary disbursements.

At Present, only Skrill, Payoneer and  Traditional IBAN/Swift code or wire transfers are available to Pakistan which is very costly, Time consuming having inflated fees of 10% to 30% plus  Bank charges of local Bank to process the amount

Furthermore, the process of voter lists should also be automated and Election Commission of Pakistan must make it available to all the citizens to register their vote when they reach at the age of 18 after getting their CNIC/Smart cards or Form B. This will enable district Election Commissioner Offices to enter the data online and consolidate the voter lists.

There should be a central directorate of all the departments so that they may have coordination on digital grounds especially the FBR, AGP, Finance Ministry and Departments, Establishment division, cabinet division, NAB and Intelligence Directorates.  Digital Pakistan’s vision will have a great impact to attract Foreign Direct Investment, strengthening of Rupee against Dollar, stabilization of the economy and discouraging paper currency that usually falls heavy upon rupee and due to substantial pressure, the rupee gets devalued and inflation jumps up.

We are too excited after Tanya Aidrus and Baqar’s statements during Digital Pakistan Vision launch and they were very confident that their sacrifices of higher paychecks for the sake of the country are highly appreciable but they will be facing resistance from the stakeholders who have been misusing the manual system for decades and it is an uphill task to compel such elements to adopt and use this digital Endeavour which will choke their corruption stream but may streamline things for the common people.

The other resistance will be from the provinces where PTI is on opposite Benches especially in Sindh and Baluchistan. It will be a big ask and the challenge that the initiated by  IT and Telecom Ministry will achieve its desired objectives given the challenges of shortage of IT Skilled Staff and messed up the bureaucratic structure.

The government should make digital literacy a compulsory part in every ministry at the Federal, provincial and district levels by setting up IT Skill development centers to train the supervisory and office staff so that digital communication infrastructure may be implemented.

There is no dearth of talent in our youth but they need support and sponsorship to do wonders. Moreover, the Government should establish a venture capital firm to support, incubate, accelerate and fund the Startups that will ultimately develop and accelerate the mushrooming growth of big startups.

The entrepreneurship courses must be introduced with help of  SMEDA, LUMS, IBA Karachi, IBA, Sukkur, SZabist, NUST, FAST, COMSATS, Virtual University and SDPI  so that entrepreneurs may learn to launch their startups successfully to conquer the digital world.

The Startups such as Careem, Bykea, and Rozee.pk are some the great examples of successful Startups. Globally, the Youth after getting their education, start their businesses to create employment but in Pakistan youth after passing Graduation and Masters, start hunting for a job. That is why Pakistan has a high level of Unemployment as youth avoid entering entrepreneurship since they lack skills, training, and financial resources.

Rupee against Dollar, stabilization of the economy and discouraging paper currency that usually falls heavy upon rupee and due to substantial pressure, the rupee gets devalued and inflation jumps up

Punjab IT Board has done a tremendous job by incubating, funding and accelerating startups in the public sector under the Plan9 and PlanX programs but it should be followed by all the Provinces so the proper Startup culture could be developed. Higher Education Commission, IT Boards, Technical Education, Intermediate education boards should promote digital Pakistan vision by introducing governance, payment solutions and fund the Ideas at School and college level.

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It is a good sign that  Online shopping Sites have experienced a mushrooming growth but mostly they accept the traditional Cash On Delivery Model (COD) which often causes losses if the customer returns the product or unavailable or Unwilling to receive the product.

E-payments ensure that the product is shipped to the target buyer or customer who needs it. Though some Online shopping sites such as Popular Daraz.pk and Yayvo.com have started accepting Credit/Debit Cards issued by Pakistani Banks but still the number of transactions is very low owing to hassles involved in getting credit cards from the banks.

At present, Only a few banks are issuing Credit Cards with Online Transactions and Point of Sale (POS) Transactions that include Standard Chartered Bank, unfortunately, limited to big cities such as Karachi, Lahore, Islamabad, Other one include Bank Al Falah which issues Credit Cards on quick processing lasting for 10 to 20 days.

Silk Bank is also the favorite bank of many customers who are interested in digital Transactions. Silk Bank offers a wide range of Credit Cards as per Income Levels of customers. UBL is also offering credit cards but it has too many conditions and terms.

Besides, these banks there other banks that are issuing credit cards such as  HBL, MCB, ABL, Faisal Bank, Askari bank and JS banks. The average interest or Mark up charged   40% which is very high as compared to other countries. The government especially state Bank of Pakistan must direct the public and Private banks to lower the markup ratio and ease the conditions to avail this facility especially suited to salaried class and Businessmen.

In Big cities, credit cards are issued instantly by Commercial Banks to the salaried Employees of Government and Companies but in small cities, the untrained and local managers avoid issuing credit cards to customers since it involves risks of recovery or payment of credit Bill.

I have personally visited many banks where I maintain my bank account, but regrettably, all the managers expressed their inability or forbade to get Credit Cards since it is very costly and you cannot be issued credit cards in small cities.

Punjab IT Board has done a tremendous job by incubating, funding and accelerating startups in public sector under the Plan9 and PlanX programs but it should be followed by all the Provinces so the proper Startup culture could be developed

Well, one will surely experience such embarrassment and inconvenience at the hands of Non-Professional Managers who are picked to only raise the deposits whereas the quality of service is compromised at the hands of such amateurs.

Therefore, Ms Tanya Aidrus head Digital Pakistan Vision and her team at Digital Pakistan Initiative will have to work out to appease the stakeholders to achieve the desired goals set as per the tenure of PTI so that Pakistanis may reap the benefits from this digital world.

To achieve this goal, the portfolio of IT and Telecom ministry must be given to a professional who should be well versed in IT and telecom preferably a Computer science or IT Graduate to pilot this project to achieve the goals in a given clear framework.

There is also a big concern regarding inflated Taxes levied upon the business community which needs to be reduced if they use Digital currency since Digital Currency will enable FBR to track payments and appraise the financial strength of the Individuals.

The e-Currency spectrum will help reduce the crime rate, tax evasion, hoarding of money as People will use credit cards and digital wallets such as PayPal, Ali Pay, Google pays those can easily be tracked and monitored through digital systems.

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Economy

The End of U.S. Dollar Dominance? Not So Fast

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With the outbreak of the war in Ukraine, Western countries have imposed all-rounded sanctions on Russia. This, in turn, has had an impact on the global economic, trade, and financial systems, raising concerns in the market and academic circles about the adjustment of the global financial system. One of the main issues being debated is the status of the U.S. dollar.

Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF) warned that financial sanctions against Russia by the West could gradually weaken the U.S. dollar’s role in the world, leading to further fragmentation of the international monetary system. Analysts such as Goldman Sachs economist Cristina Tessari said the actions of the United States and its allies to freeze Russia’s central bank’s foreign exchange reserves have sparked fears that countries may begin to ditch the dollar due to concerns about the power that the United States could muster thanks to the dominance of the currency.

Kenneth Rogoff, a Harvard University economics professor, said in an interview with Bloomberg that the dominance of the dollar could end within 20 years. The reason is that the U.S. and its allies have launched sanctions due to the Russia-Ukraine war, restricting Russia’s access to the dollar-dominated global financial system. This “weaponization of the dollar” will instead stimulate the acceleration of alternative solutions. Rogoff believes that the U.S. blockade or freezing of the foreign exchange reserves of the Russian central bank is undoubtedly a historic development. The preeminence of financial sanctions on Russia by the U.S.-led Western world could accelerate changes in the international financial system to compete with the U.S. dollar. While this certainly would not happen overnight, what could have taken 50 years may now only take 20 years to realize, said Rogoff.

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This narrative appears to be supported by data changes in the dollar’s position in global markets. According to the IMF’s most recent Currency Composition of Official Foreign Exchange Reserves (COFER) data, the American currency’s global dollar-denominated foreign exchange reserves were USD 7,087 billion in the fourth quarter of 2021, with a market share of 59.15% in the third quarter, which had dropped to 58.81%. The dollar’s share of the global reserve currency was as high as 72% around the turn of the century. According to SWIFT’s worldwide payment data, the payment share of the U.S. dollar has declined to 38.85% in 2022.

Is the outlook for the dollar’s prospect as pessimistic as these academics and institutions predict?

ANBOUND’s founder Chan Kung holds the exact opposite view. He believes that if the global situation continues with the current development trend, the U.S. dollar will stand out in the world. If there are no exchange rate swings caused by inflation or emergency, the U.S. dollar will be in a unique position when compared to the world’s major currencies.

This begs the question, why would the future of the U.S. currency be diametrically opposed to what many feels is happening while a significant game-changing geopolitical event, especially the conflict in Ukraine, is ongoing?

The difference lies mainly in the variety of opinions on the impact of the geopolitical event of the war in Ukraine. Professor Rogoff believes that the dollar has been reduced in terms of market scale, and new currency substitutes will emerge, thereby weakening the dollar’s status. However, Chan Kung believes that the alternatives to the U.S. dollar cannot succeed, because the market of these alternatives is weak, while their social economy is turbulent, and some are even still in war zones. For these reasons, the U.S. dollar will remain strong, even becoming the sole stable international currency in circulation. All in all, geopolitical factors play an important role in global currencies, and the dollar will be supported by it.

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Chan Kung noted in his article Bracing the Era of Economic Shortage, that during a period of economic uncertainty, the Anglo-American axis countries might be safer havens in the face of geopolitical turbulence. He believes that once the geopolitical war in Europe is resolved, the maritime countries and economy of the American continent would re-emerge. From the perspective of the world’s spatial pattern, conflicts and competitions are most intense in the continental region of the world, that is, the continental region where Europe, Russia, the Middle East, Central Asia, China and India are located. It would be difficult to establish buffer zones between them, hence there are direct collisions with each other. Conflicts and competitions are unavoidable and often have existed since time immemorial. The deep mutual hostility has long been recorded in the chapters of history, and the only thing lacking is often a reason for the actual friction to take place in reality.

In contrast, the geographical location of the Anglo-American axis is in the middle of the ocean. The Atlantic and Pacific routes connect the American continent and a large number of island countries and regions of different sizes, and there are often oceanic divisions between them. Historically and relatively speaking lesser enmities exist between these parts of the world, and they are mutually dependent in trade relations. Therefore, while the continental regions are experiencing violent upheaval, the Anglo-American axis, the maritime states, and the Americas have more prominent opportunities for development and enjoy greater prosperity than before.

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Ahsan Iqbal reviews the Ministry of Planning, Development and Special Initiatives Work on Projects

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Federal Minister for Planning Development & Special Initiatives Professor Ahsan Iqbal directed to hold Turn Around Pakistan (TAP) Conference in order to address key challenges of the country and to find their solutions through short-term and mid-term measures. The decision was taken on Wednesday while chairing a first ministerial meeting which was attended by Deputy Chairman, Planning Commission, Secretary, Additional Secretary, Members and all Chiefs of the sections.

“Invite all the stakeholders from across the Pakistan in TAP Conference to find ways to kick off the economy by taking immediate remedial measures,” said newly-appointed minister for Planning Development & Special Initiatives while chairing a high level meeting. “The prime objective of the conference is to engage all the relevant stakeholders from across the country and take their input in order to put the country’s economy on track which unfortunately has been thrown in dire condition, said the minister.

While referring to the stakeholders Conference held in 2013 for preparation of vision 2025, the minister said that no policy can be successful without stakeholders ownership. There is rich talent in academia and private sector which must be harnessed. “There is a dire need to develop the economy on cluster based approach and Planning Commission must play its role as development think tank of the country,” he added.

The minister further said that every section chief should be a knowledge leader in his/her field, while stressing the government officials to take the decisions with confidence as (he) will stand behind them. “Your work is not just to clear PC-1s of the projects but to develop and shape development agenda of the country and to implement it,” said the minister. The minister further said that in 2013 Planning Commission was part of the Finance Division and nobody knew about it but it was granted autonomous status by PMLN government and it developed and implemented 2025 vision very successfully.

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During 2013-18 more than Rs 700 billion were saved through rationalisation and scrutiny of development schemes by Planning Commission. Same spirit and professionalism should be revived. Prime Minister wants to see Pakistan Speed in every sector, he added. During the meeting, officials of various section shared their opinion which was appreciated by the minister and reiterated that it will be taken in TAP Conference to be held soon.

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Economy

Pakistan’s trading partners

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There have been questions raised on the extent to which foreign policy of Pakistan should reflect its trading relationships with individual countries, regions, and groups of countries which are members of international organizations? This requires determination of which are the major destinations of the country’s exports, and which are the major origins of our imports? What is the regional and country-wise pattern of our trade surpluses and deficits? And which are the major countries to which our exports have shown faster growth?

The analysis has been undertaken with trade data made available by the SBP in its economic data website. For earlier years, the relevant information has been obtained from the SBP publication, Handbook of Statistics on Pakistan Economy.

The top four export markets of Pakistan in 2020-21 are the EU countries combined, the USA, UK, and China. It is significant that the major destinations of Pakistan’s exports are mostly in Europe and North America. Pakistan has been granted GSP plus status by the European Union with some preferential tariff treatment. Pakistan also has a free trade agreement with China which has been implemented in steps from 2006 onwards.

The combined exports to the 27 EU countries aggregated to $6.4 billion in 2020-21. This represents a share of 25 percent of Pakistan’s total exports. The second largest value of exports is to the USA of $5.0 billion, equivalent to 20 percent of total exports of Pakistan.

The other two relatively large destinations of the country’s exports are the UK and China. Combined, the share of Pakistan’s four major export markets is over 62 percent of total global exports. This highlights the extreme regional concentration of the country’s exports. The share of SAARC countries is only 8 percent, despite presence of the SAFTA free trade agreement. It was somewhat higher when there was trade directly with India.

Turning to the regional distribution of the country’s imports, the sources are more diversified. China is by far the dominant exporter to Pakistan. Imports from China aggregated to $13.2 billion in 2020-21, equivalent to over 25 percent of total imports. The other major exporting countries to Pakistan include the OPEC countries with a share of 24 percent, followed by the EU countries and the USA. Overall, the combined share of these countries is close to 55 percent in total imports of Pakistan.

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What has been the growth rate of exports to the major destinations? Between 2012-13 and 2018-19, the fastest cumulative increase over the six years is to the UK of 33 percent, followed by a 32 percent increase to Germany and of 11 percent to the USA. The big declines are to China of 27 percent, to Afghanistan of 37 percent and to the UAE of as much as 57 percent.

By far the largest increase in imports has been from China, which has taken full advantage of the free trade agreement with Pakistan. Between 2012-13 and 2018-19, the cumulative increase has been as much as 133 percent. Now China alone accounts for 30 percent of total imports of Pakistan.

The overall trade deficit of Pakistan was very large in 2020-21 at $26.5 billion, with imports over twice the level of exports. Therefore, the likelihood is high that Pakistan will carry a significant deficit with most of its major trading partners. The country-wise balance of trade is given in the table below.

========================================================================
                                   Table 1
========================================================================
       Pakistan's Trade Balance with Major Trading Partners, 2020-21
                                                             ($ billion)
========================================================================
                        Exports to    Imports from      Balance of Trade
========================================================================
China                       2.0         13.2                       -11.2
USA                         5.0          2.4                         3.6
EU Countries                6.5          3.7                         2.8
Major OPEC Countries        1.9          9.4                        -7.5
Others                     10.2         28.7                       -18.5
========================================================================
Total                      25.6         52.1                       -26.5
========================================================================

Pakistan has a very large trade deficit with China, equivalent to 42 percent of its global deficit. The deficit has been growing rapidly. Pakistan’s exports to China have been declining while imports have shown fast growth. Today, China’s exports to Pakistan are six times its imports from Pakistan. The time has come for a review of the implementation of the 2006 Trade Agreement between Pakistan and China. Pakistan needs to seek more quid pro quo from China.

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The trade surplus with two major trading partners – the USA and the EU countries – is of $3.6 billion and $2.8 billion, respectively. These are the bigger markets, especially for textile products. The trading relationship with these countries needs to be preserved and built upon.

Pakistan has preferential access to the EU market through the GSP plus programme since 2014. This allows a large share of Pakistan’s exports to enter EU countries free of duty. Two criteria must be met for continuation of this facility. First, GSP-covered imports should be less than 2 percent of EU’s imports from all GSP beneficiaries. The share currently of Pakistan is 1.6 percent. Second, the seven largest GSP covered products must account for at least 75 percent of Pakistan’s total GSP covered exports to the EU. The share currently of these products is 94 percent.

Further, Pakistan has had to ratify 27 core international conventions and subscribe to binding commitments to implement them effectively. These are mainly UN and ILO conventions and other conventions on environment. The GSP status of Pakistan is periodically reviewed by the EU. Weak areas of implementation by Pakistan relate to gender inequality, workers’ rights, and the presence of child workers.

There has been some focus recently on Pakistan’s trading relationship with Russia. The current volume of trade between the two countries is small with $163 million of exports and $593 million of imports. The imports are largely of wheat. Now with the international trade sanctions on Russia following the invasion of Ukraine, new sources of wheat will have to be found when the quantity required could rise to almost 5 million tons given the failure of the current wheat crop.

Via BR

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