Trade, can it Herald Peace?

Since Pakistan and China are already engaged in active business particularly in Machinery and tooling for light to heavy industry, it would be interesting to see how India fits into this business environment.

The other interesting point is that Pakistan will become a test case for India to compete against Chinese products in durability, quality and price. Similarly since Pakistanis are already competing against Chinese products atleast in consumer products, Indian products should not pose a problem. There are however, areas where Indian products will definately face no threat, like durgs and possibly in vehicle manufacturing areas as already mentioned in the pervious posts specially (ahem) raidator caps as only Indian company makes it.

While Indians are eager to do business with Pakistan there is little interest in doing business with China. China is as large as India itself thus it should provide a better market. And did Indians ever thought os opening their market for Chinese products? What could happen is every body`s guess.

I will post an example that I heard from my Father`s friend. In mid 80`s this industrialist decided to set up a zipper making factory in Korangi, Karachi. After making initial calculations he found out that his cost of production will be around 36 paisa per linear foot and at that time the zipper imported from China C&F cost at Karachi was around 10 paisa per linear foot for the same specification zipper. He abandon the idea. He started to make rivits instead because he can produce them cheaper then Chinese made rivits.

I am all for India Pakistan business because I believe it will definately favor common man in Pakistan and lot of items will be selling cheaper. As far as ``made in India`` syndrome is concerned it is bogus. Pakistanis will buy cheaper products if India can offer it. We are already watching Indian movies (minus me from that list though) and Indian TV (minus me from that list again) and Indian Pan Masala, Pan, Bettle nut, katha, so on so forth. SO whats wrong in consuming Indian tires, tea (tetly or whatever), cars, trucks or whatever India can offer cheap.

The bottom line is that can India compete with Chinese made products and cheaply produced local products?

The answer is soon to be seen, I guess.

Asfand

Urstruly:
``The problem that when India has not played fair with us since Partition then what would make them play fair this time, comes next. But it is also a part of the problem.``

Since when has a bania -of any religion or country- played fair? All you have to ensure is that your `banias` have the same tools at their disposal as the Indian banias, let the banias fight each other and let the consumers benefit from that fight.
As for your rulers, they may have sold their souls to others but I think that they have a pretty good record of standing up to the Indians.

...and you should disabuse yourself of the notion that the bania has any other motive other than making money, especially `silly` notions like patriotism. Your banias were quite happy to sell sugar to India when the two countries were fighting each other, and the American bania has no problem giving pink slips to its own folks if he can save money by sending work offshore.

This is a cut and paste job. I guess it would be good article in the context of all the discussions going.

Asfand


INDIA - THE NEXT CHINA?
by Lynn Carpenter

The U.S. papers say China`s a blooming miracle. The Indian
press says China`s making the whole thing up. And the story
from those who search hard for the coming trend to write
about it first is that India is the next China.

Hoo-boy. Things sure have changed from the days when China
was going to be the new India. I`ve been looking at both
countries, and here`s what I think. India`s not the next
China. Not yet. Both countries have many risks, but China`s
emergence has a momentum and key support that India`s does
not.

It is interesting to read the Indian press reports. They
are replete with accusations that China is miscounting
ships in port, lying about its trade figures and fudging
the foreign direct investment numbers. They claim most of
this investment is Chinese money illegally sneaked
offshore, washed clean and then shipped back home as phony
`foreign` money.

China, in contrast, is largely ignoring India`s claims of
greatness. This may not provide numbers you can take to the
bank, but it is telling. Leaders don`t spend time whining
about how the laggards cheat. By contrast, India`s stance
strikes me as too much along the lines of, `I would have
won the marathon if they hadn`t had special shoes.`

China is the leader in this race for emergence right now.
The Chinese growth story is for real. Even if the Chinese
have overstated exports, as India claims, you can be sure
that the amazing numbers from Wal-Mart are a good cross-
check. Wal-Mart imports over $15 billion in merchandise
from China every year.

But what about India? Is it finally emerging from its
struggle to gain a foothold? Should we be looking harder
for ways to invest there?

Ah, if only we knew where to look!

India has been busy sending its companies global. Around
the world there are dozens of GDRs (global depository
receipts) and 144A companies. Americans can`t buy GDRs
easily. It generally requires an offshore account. As for
144A`s, they are limited to qualified institutional buyers.
That leaves us with the Level I, II and III ADRs. The Bank
of New York lists 13 such stocks.

Man... look at this crew! Talk about the not-quite-ready-
for-prime-time players. Seven of them have zero to negative
return on equity. Those that are profitable have ROEs
ranging from 4%-25%. But they also average a 39.8 P/E
ratio. There`s exactly one company on the list that I would
consider buying, if it were not so expensive at the moment:
Infosys. The others are modest businesses, with growth no
better than their U.S. counterparts, but much higher
valuations.

So far, the major business model for the more highly touted
Indian companies is: copy what`s done in the U.S., do it
cheaper, and ship it back to us. Innovation and R&D
spending are not robust. But journalists touting India seem
to be unaware of a fatal flaw in that plan. Not only are
the profits to be made selling cheap substitutes limited,
but it`s a plan all India`s fellow emerging economies can
copy. Taiwan and South Korea are already cutting into the
world IT market.

I`d rather find a sound business engaged in a more
sustainable market: capitalizing on the boom at home. A
good example of this is Sina.com or Sohu.com, the Chinese
Internet companies. Or CHINA UNICOM, the telecommunications
company that is gaining subscribers at home by the
millions, not to mention subscribers in nearby countries.
They`re not value investments today, but they are sound
businesses.

And Indian companies on these models? They`re in short
supply, and overpriced, too. That`s because India`s
internal progress still has far to go. India`s GDP may be
rising on exports, but it is not advancing on consumer
spending at home.

Quite simply... India has been on the brink of `emerging`
and becoming a world force about 40 times in the last 20
years. OK, I exaggerate, about once every two or three
years. But it never quite sticks. It`s not trustworthy yet.
India has not yet gathered China`s momentum. Or, as they
say these days, it hasn`t reached the tipping point.

India is still a story about billions of people hungering
to advance. That`s a spurious argument. It applies to
Africa as well. Wishes are not ability. What`s more, the
problems facing India are just as large as, if not larger
than, China`s.

China has heavily indebted banks and high unemployment in
its western provinces. India has high unemployment across
the country, but a much more advanced banking culture,
which would seem to give it an edge in the business world.
But it hasn`t worked that way.

China began courting Western business in the 1980s. It was
a rough beginning, fraught with high suspicion and
inconsistency. Over the years, China`s centrally controlled
government has become committed to privatization and
cooperation, as long as it doesn`t threaten central power.

India is still as suspicious of outside influences as China
was 20 years ago. It had a long history of domination by
the British that did its own people no good. But the big
difference between India and China arises from the years
when both countries threw Westerners out.

China, as a communist country, set upon a course to educate
and employ all its population. It came at too high a cost
to sustain, but it left a country where everyone had a
taste of success for a while and an entire generation of
well-educated students.

That never happened in India. Despite progress against
poverty in the 1980s, the trend began reversing again
during the early `90s, when inflation hit India. In the
1991 census, 38% of India`s population was again below the
poverty line. Not only are millions of adults illiterate,
but so are millions of children.

This creates a spiraling vicious cycle for India. It needs
progress so that it can afford to aid its own people. But
with so many of its people poor and untrainable, it is hard
to make that progress. India`s largest industry is
agriculture. Textiles come second. The vaunted IT sector we
hear so much about is a mere 3% of the economy.

The IMF recently warned that India`s GDP growth this year
is likely to be less than last year... and that it will not
meet its target 8% growth rate over the next several years
without major repairs to the physical and social
infrastructure. It needs roads, railroads,
telecommunications, training and education to proceed. It
must make daunting improvements within the country - in
poverty, literacy, energy and free access to improvement
for citizens below its small privileged class.

But the government is strapped. Its deficit comes to 10% of
the GDP (the United States` current record deficit is
roughly 5% of GDP). Its cumulative national debt equals 80%
of annual GDP. But when it comes to privatization, the
engine for progress and Western investment, India still has
strong, powerful resistance from farmers and labor trade
unions.

India`s lack of buying power at the ground level where
consumers live is astounding. Partly that`s the result of
its attempt to leapfrog from an agricultural economy to a
service economy - a model that excludes most of the
population. The true path to successful development wends
its way through industrialization first. It comes with
higher rates of education, literacy and health. And it
comes with heightened confidence on the part of large
international investors - as represented by foreign direct
investment.

Until the big boys put their money down, it`s not safe for
small retail investors to get in on the game. Foreign
direct investment to India just barely nudged up to $6.7
billion last year. That`s about what flows to Poland or
Portugal... though admittedly, it`s a great increase from
the $2 billion or less of prior years.

If you`re determined to catch a mainstream trend, catch the
China wave rather than India`s. As an investment, I still
much prefer China. An impressive portion of China`s growth
is coming from industrialization and consumer products with
both domestic and international appeal. It also has large
companies like Sohu.com and CHINA UNICOM that are growing
rapidly by selling goods and services at home and to its
neighbors in Asia. That`s a better sign of economic
vibrancy.

I think the current India mania is a dangerous bubble. So
are the main Chinese stocks at their current valuations. I
will continue to look for Indian companies that are good
values; one day India will make the turn, and I`d like to
be there.

For the moment, though, I don`t see much point in chasing
the Indian dream.


Regards,

Lynn Carpenter

P.S. Yes, yes, I know what you`ve heard: They speak English (ha! ha!
you can`t tell if they are speaking English or Hindi)
a lot in India, have cheap programmers, and this time is
different. India is about to explode.

But what kind of growth strategy is that? I`ll tell
you... one that every other country in Asia can copy as it
emerges.

Here`s something India touts forget to mention when they
talk about India`s educated masses of tech-smart labor. You
may have heard how cheaply India`s software programmers
work. And probably you were told it was a sign of India`s
growing competitive importance and success.

But consider: Ten years ago, Indian software consultants
were able to charge $70-$90 an hour to their U.S.
customers. Today, they are charging $10 an hour or less.
India is not winning the IT World Olympics. It is losing
economic ground every time it cuts its fees...

actually to all.....hot air.We all need to rah rah a bit once in a while.In person we might be civil and actually become friends.India`s next PM sonia gandhi says she will continue the peace process with Pakistan...Hey whatever pakistanis say about indians the proof of the pudding is in the eating...that sonia gandhi can aspire to hold the top executive post in Inida is proof that india is a more openminded society than most.I rest my case.The elections have now opened up a new round of discussions for all of us.Happy ranting, everyone.

Tauheed at # 56:

I agree with your assertion that pakistan will struggle with foreign investment.

It seems that you are laying the blame of internal insecurity of Pakistan on President Musharraf. I don`t think so. Lack of security is plainly attributable to terrorism and will take a long time to correct. There is no communal violence in Pakistan that can be addressed by e.g. bringing in the communal leadership and sorting out their differences through negotiations. The sectarian terrorists are not going to listen to anybody. It will take the Government technological and educational measures that will eradicate this menace in medium to long-term range. Unfortunately, we have to live under the burden of our follies of the years gone by for quite some time in the future.

Dost

You did not understand my point. I have no problem with trade or trade volume. My problem is internal i.e. unless there is a strong and independent legislature to protect the interests of farmers, producers, businesses, and consumers it will be an economic suicide for Pakistan to go ahead with SAFTA or WTO. How can a despot who raids his own people with an army of tanks and gunship helicoptres at the urging of foreign powers, be trusted with our financial future when he doesn`t know himself whether he would last another day or not.

The problem that when India has not played fair with us since Partition then what would make them play fair this time, comes next. But it is also a part of the problem.

Urstruly:
It is true that SAFTA or even open trade with India will have more impact on Pakistan than on India. My own prognostication would be that it would have a small negative short-term effect and a large long-term positive effect on Pakistan. If I were a Pakistani, I would also insist upon transitionary measures to assist those sectors in Pakistan which may be particularly vulnerable to Indian exports. But even if I were wrong, the argument you make of an already skewed bilateral trade with India is no argument at all for restricting trade with that country. It does not really matter if Pakistan is exporting as much to India as it is receiving. What does matter is what those imports are substituting? If imports from India are displacing local products, this would be one thing; but if they are merely displacing imports from other countries, then they do not cause any damage to Pakistani producers, and indeed could be saving Pakistan some of its foreign exchange if the goods from India can be had cheaper.

#80 by Urstruly

so now i get your real objection.

``The issue of SAFTA was never debated in National Assembly and despot and his cronnies signed it without taking the nation into confidence. Therefore it is the duty of every Paksitani to reject SAFTA and WTO.``

i agree with you there. no point doing any deals without a debate. so what you really propose is an inquilab, since there is no formal debate on anything at all.

indian interest in freer trade is mildly economic, more on security front, and with a long term hagemonistic (sp?) effect on the area (not a bad thing, we all will live happily, except not necessarily under a musalman rule, could be roman catholic).

Jang

Two reasons but neither is compelling or worth losing sleep over.

In todays newspaper there are two essays on SAFTA and trade with India. One essay that cautions us to observe restraint in business with India cites that in the fiscal year 2002-3 Pakistan`s exports to India were 70.6 mil US dollars whereas imports from India were 616.5 mil US dollars. And this is when SAFTA is three years away. Then he cites a case about a recent conference held in Islamabad by SMEDA (small and medium size enterprise development authority) where none of the participants in conference could tell what SAFTA stood for. Then he cited about another recent conference by ministry of agriculture where the news about SAFTA were heard with a jaw dropping surprise.

The second essay that supports the SAFTA agreement and seems to be towing the government line portrays it as one of the greatest human achievement in this part of world. After the usual sarkari emotional drivel when author comes down to building the case for SAFTA he elaborates it on as if SAFTA will only allow discretionary trade between the two countries. But SAFTA trade is not discretionary. It is an open border documented trade. He mentions that SAFTA would mean import of some chemicals and processed steel from India and also tea. He states that the average mutual trade between two countries is between 250 - 300 mil US$ whereas illegal trade between the two countries is close to 1.6 billion us$. He argues that SAFTA will help legalize this trade which is a 64 thousand dollar joke.

The fact of the matter is that government has continually shirking its duty to disclose the details of SAFTA and what it entails for the farmers, producers, and consumers of Pakistan. The issue of SAFTA was never debated in National Assembly and despot and his cronnies signed it without taking the nation into confidence. Therefore it is the duty of every Paksitani to reject SAFTA and WTO. Both of these attrocities amount to our national collective suicide. As long as there is taxation without representation, as long as there is no proper and independent legislative body in Paksitan that would not only look after the interests of not only the businessman but also that of manufacturer and consumer we the people of Paksitan cannot allow fauji dumbfucks to a collective economic murder of us all. Therefore it is imperative for all Paksitanis to support all those forces who promise our retraction from the attrocities of WTO and SAFTA but also the public executions of faujis.

``Humility goes a long way.``

Look who is talking.

``If one were to analyze the steps taken by each nation so as to bolster trade related ties, it would be clear that India has clearly accorded more sops to Pakistan and the latter’s reciprocation amounts to a naught.......The army is powerful, and lots of other big problems exist in Pakistan. Conflict with India is something the army needs to justify its own existence, and something the government (whether civilian or army) can use to divert attention from domestic problems...again a time-tested practice......The popular refrain so far has been that Pakistan cannot award such a ‘coveted’ status to a country with which it has an ‘ideological’ conflict........In political terms the stated position of Pakistan for popular consumption or for gallery is it could not trade with India on the blood of the Kashmiris.........Pakistan watchers on this side of the border (India) reckon that the Pakistan Army has a vested interest in not allowing more trade to flow across the divide. Trade would inevitably increase people to people contact and this would mean that the army’s control over the establishment would loosen as increasing number of people would interact with people from the ‘other side’ and this would mean infusion of liberal ideas in the hereto closed society. ........that existing power equations in Pakistan mean that self-interested people would lose more from peace than war.``

Why does every Indian article on Pakistan, blames Pakistan for nearly everything? Indian writers, quoting Indian professors, and Indian websites, painting strange pictures of Pakistan. No wonder Indians were so suprised and overwhelmed when they saw Paksitan, in person..... :-)

Perhaps the first thing that needs to happen, for peace, is for Indians to carry out some introspection, and to get a more objective view of the whole situation, in South Asia, and spread blame equally.....Otherwise, India will turn into Vereeshabad, i.e. well-meaning Indians, who genuinely want peace with Pakistan, but are convinced that Pakistan is the cause of all the problems between India and Pakistan........And desparately wanting Pakistan, ``to get its act together,`` while being convinced that India is not to blame for much.......

Veeresh ji, can you tell me what products Pakistan can sell to India? Will India agree for Gas Pipeline through Pakistan, will India Purchase Electricity, No India will never.

ULTRA PATRIOT, is it Economical for India to buy Expensive LPG via Tankers instead of cheaper Gas directly via Pakistan?.

Urstruely

``Now how can we do business with you? Give me one good reason. ``

1. God is on your side. Why, you a proud musalman fear minor banya intellect? You go around quoting One-Hair (Iqbal) and his claim to khudi, and you are scared of indulging in little bussiness? This after being a follower of a great bussinessman of 7-th century arabia? This is unforgivable.

2. Yes, the Sahukar of the yesteryear is much-maligned. My own folks told me of how the money lending in pre-partition pak was all in bania hands. Evene Alamgir Aurangzeb had to deal with moneylender banias to finance his campaigs. So i understand your pain, however, this is all yesterdays social structure. Today, the sons of sahukars have to do govt jobs and software writing as anyone else. So, as far as you are willing to accept that musalman may not necessarily dominate, the playing field is level. Consider that with baygahirat banias help, aam musalmans lifestyle may actually improve! Currently, granted that some musalmans dominate in pakistan, but at the expense of a large number of other musalmans.

so there, two reasons. And by the way, your last post was long-winded but did not make a crisp point as your posts normally tend to make. was it from romair?

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Vereesh #66: ``Poor Mr. Patriot.``

I truly hope that you do not work in the sales department of any Indian company; specifically one that wants to sell in Pakistan. Whatever opportunities that company may have in selling in Pakistan, will be ruined by your comments and attitudes.

If there is one thing I have learnt, after becoming a businessman (albeit a small-businessman, at the moment) is that humility goes a long way. The other thing I have learnt is that businessmen have one aim: to successfully (and hopefully legally) make money, and more money

I get hired to give advice to companies in how to set up and/or overhaul their IT depts. This involves sitting down with VPs and CIOs and advising them. One of the hot issues at the moment is off-shore development. Every single client has asked me about where they should do off-shore development. And I have told every single one to go to India. Even though I am a Pakistani. Why? Because, at the moment, I think that is where they will make the most money.

During this process, I end up meeting sales reps from Indian off-shore companies. The one from Tata, handling a major part of North America, is a close acquintance. We are family friends now, and watch Indian movies together, whenever we meet. I have worked with the Infosys guys also. And will be meeting Wipro shortly. There is one trend about all Indian IT people I have met in North America, that I greatly admire. They are all extremely humble. They are the most humble successful people I have ever met, in my life. Quite the opposite of most Indians I come across on Chowk.

Not once have they told me how India`s IT industry is gigantic, while Pakistan`s is tiny (which it is). They have never told me that all the radiators in Pakistan are made in India (even if they are). Or how everyone in Pakistan is Mr. Patriot, while everyone in India is Mr. Peaceful. To make a long story short, they never concentrate on one-upmanship, even in areas, where they could. Either because they are good salespersons, or because it not their nature, or because they know I am not an idiot and understand profit and loss, as well as they do.

Now, imagine what would happen if they followed the same logic and marketing approach you are following. If they tried to show me that they know more about Pakistan, than I do, even though I have grown up in Pakistan, and they have spent five days there. And that I need to get my act together. And that Mr. Patriot is the only things keeping Indian CDs out of Pakistan, etc. What would be my reaction? Do you think I would buy their nonsense? Do you think the next time I advised a VP, I would be inclined to advise him to go to India, or to go to China or Russia or Pakistan?

Humility goes a long way. As does an attempt to not be judgemental. Pakistani businessmen got into privatisation in the late 50s - thirty years ahead of anyone else in South Asia. They are quite shrewd. They know a good deal when they see it. You don`t need to convince them. In fact, your arguments may actually drive quite a few away, rather than attract more.......

#66 -- oops it has already begun -- my sympathies are with you bong/asfand -- veeresh sahib -- `ask anyone who travels on the lahore-isb motorway` -- already did,s everal who use it quite frequently, they laughed in my face, thought i was a lunatic -- and they arent the nationalistic types, if something like this was happening they would be the first to tell others -- seriously veeresh sahib, seriously - poor mr. Veeresh