United States: Ilhan Omar expelled from House committee

According to Reuters, US House of Representatives Republicans on Thursday ousted Democrat Ilhan Omar from a high-profile committee over remarks widely condemned as antisemitic, two years after Democrats removed two Republicans from committee assignments.

The deeply divided House voted 218-211 along party lines to remove Omar from the Foreign Affairs Committee with Republicans citing the 2019 remarks for which she later apologized. One Republican voted present.

Omar, who arrived in the United States as a refugee from Somalia, is the only African-born member of Congress and one of the only Muslim women in the House. She was in line to be the top Democrat on the foreign affairs panel's Africa subcommittee.

Shortly after the vote, House Democratic Leader Hakeem Jeffries made a countermove, announcing that he intends to appoint Omar to a seat on the Budget Committee where she will defend Democratic values against right-wing extremism.

Republicans, who won a narrow House majority in November 2022 election after years in the minority, said they wanted Omar, a third-term House member, off Foreign Affairs for statements that included a 2019 tweet which read, "It's all about the Benjamins baby," suggesting that Israel's supporters in US politics were motivated by money rather than principle.

Benjamin Franklin, whose signature on the 1776 Declaration of Independence and 1787 US Constitution earned him the reputation as a founding father, is portrayed on the US$100 bill.

During debate, Republican Mike Lawler said, "Words matter, rhetoric matters. It leads to harm. The congresswoman is being held accountable for her words and her actions."

Omar and other Democrats said that any such remarks were made years ago and that Omar had deleted the posts and apologized at the time.

Moments before the House expelled her from the committee, a defiant Omar said, "My leadership and voice will not be diminished if I am not on this committee ... my voice will get louder and stronger."

Omar has said in the past that US forces and those of other countries should be held to the same standards of accountability when their actions hurt or kill civilians.

The ouster, led by House Speaker Kevin McCarthy, was viewed by Democrats as revenge for their voting in 2021 to remove Republicans Marjorie Taylor Greene and Paul Gosar from their committee assignments after incendiary remarks.

In 2021, Greene had compared COVID-19 mask requirements and vaccinations to the Nazi Holocaust that killed 6 million Jews. She eventually apologized. Before her 2020 election to Congress, she voiced unfounded conspiracy theories, including an antisemitic claim suggesting a space laser possibly was used to deliberately start a California wildfire.

Gosar had posted a video on social media showing him appearing to kill another House member, Democratic Representative Alexandria Ocasio-Cortez.

Omar and Ocasio-Cortez initially comprised half of a group of progressive House Democrats elected in 2018 who became known as "The Squad" and included Ayanna Pressley and Rashida Tlaib. The movement has since grown.

McCarthy has given committee assignments to both Greene and Gosar as well as George Santos, a newly elected representative who has admitted to fabricating much of his resume, although Santos has temporarily stepped away from those assignments while working to clear up questions about his ethics.

Before the vote, Jeffries told reporters that Democrats had condemned Omar's "Benjamins" remark.

"There has been accountability. Ilhan Omar has apologized. She has indicated she'll learn from her mistakes" and was "building bridges" with the Jewish community. "This isn't about accountability. It's about political revenge."

McCarthy previously rejected assignments of Democrats Adam Schiff and Eric Swalwell to the House Permanent Select Committee on Intelligence. Both played major roles in the impeachments of Republican former President Donald Trump.

 

Russia and Iran in Energy Market: Competition or Cooperation

Many observers believe Moscow is behind every significant international development or organization, be that the results of the US Presidential elections or the decisions of the European Parliament.

That is rooted in lack of systemic understanding of international relations and sovereign motivation of its actors. A similar approach is taken with regard to Iran’s policy in the Middle East. Where a Shiite individual or movement makes a step, Iran’s opponents see footprints leading to Tehran. Neither of the two capitals has both motivation and capabilities to control such developments abroad, so before ascribing any role to Moscow or Tehran, one should better study how things work in reality, rather than according to their imaginary schemes, even if such schemes make sense to the public.

One of these approaches, which is rather similar to the conspiracy theory, is to blame Russia of taking deliberate actions to strain the relations between Iran and Europe, and subsequently, targeting Iran in the energy market as a potential actor to replace Russia in Europe's energy supply.

The global developments that have turned up in the last few years have caused Iran-Russia relations to enter a new, comprehensive and rather strategic phase. Despite the unprecedented violations and sanctions imposed on Iran by Western countries, the evidences of new cooperation between Iran and Russia show that the recent alliances are on the path of comprehensive development.

Cooperation in the field of advanced technologies, unprecedented trade volume up to US$4 billion in 2022, bilateral military collaboration, gas memorandum between Iran and Russia's Gazprom and also, Russia's support for Iran's membership in the Shanghai Cooperation Organization shows the remarkable expansion of strategic relations in recent years, especially after the intensification of Western sanctions on both countries.

In a completely simplistic judgment, some analysts believe in Russia's pre-planned strategy to completely eliminate Iran from global equations, especially by preventing the restoration of this country's relations with the European Union in the field of energy exports as an alternative to the sanctioned Russia in this market. In order to justify their claim, they pointed to the military cooperation between Iran and Russia, which became an excuse to intensify the sanctions of the European Union against Iran, as well as diminishing the possibility of revitalizing the JCPOA, and they consider it as a scheme by Russia.

Spreading such pessimistic views lead to questions that can invalidate such views to some extent. Considering the disconnection between Russia and European countries in the field of energy trade, how can Iran supply the amount of energy needed by Europe as an alternative to Russia in terms of production infrastructure, production volume, export capacity, as well as logistical ability?

A detailed examination of Iran's production and export capacities and capabilities in the field of energy such as oil, gas and even petrochemical products can well answer the above question and negate the mentioned point of view.

According to the gas crisis of Europe during the last year, many supposed that Iran would be the best option to compensate for the shortage of gas in Europe. Declaration of such a proposal showed that some analysts were not informed about the production capacity and conditions of facilities and infrastructure of Iran's gas fields.

According to statistics, the average gas consumption in the country is 250 billion cubic meters per year, and the total gas production in 2021 was about 269 billion cubic meters. Moreover, Iran's total gas exports to Iraq and Turkey are 17 billion cubic meters annually. Therefore, if we consider consumption and export to Turkey and Iraq, the amount of production is almost equal to both consumption and exports. Therefore, considering gas export, Iran will need a large investment for development of production infrastructure, that the recent agreement between Iran and the Russian company Gazprom is concluded with the anticipation of the infrastructure expansion, which is a manifestation of Russia's willingness to strategic cooperation with Iran even in the field of energy.

Others point to Europe's greater need for Iranian oil than gas, and this will be the best opportunity for Iran to take advantage of the current situation by supplying oil to European Union countries.

Although this expectation seems reasonable to some extent, it should be noted that in the current situation Europe's immediate demand for oil is lower than gas. One should acknowledge that oil transportation is easier than gas, and Europe's supply sources, such as Saudi Arabia have more variety of products. Moreover, it should also be taken into consideration that even with restoration of the JCPOA and the beginning process of exporting oil to Europe, in the current conditions Iran's oil will not have a notable impact on the reduction of Europe's oil demands.

Considering the production of 4 million barrels of oil per day and also in light of domestic consumption, Iran's export capacity is expected to be 2.0 to 2.5 million barrels per day. Referring to the number of barrels that will be exported to South Korea, Japan, China and India, therefore ultimately one cannot imagine a significant amount for export to Europe. Although one should admit that this number of barrels will make no difference to Russia and the long-term prospects of this country in international relations.

According to the mentioned points, it implies that some criticisms toward the enlargement of Iran and Russia's relation are completely thoughtless and stem from the lack of correct and systematic understanding of international relations, and undoubtedly, some of them are rooted in some historical narratives in the relations between the two countries.

The analysis of any international policies should be based on the principles of international relations and realities, not on excitement and personal interests to a particular side or even conspiracy theories.

The relations between Iran and Russia have been progressing towards comprehensive development in recent years, and its effects can be seen in the internal and external developments of both countries.

One of these fields is energy trade, where both countries have had valuable cooperation to increase each other's production and export capabilities.

Nevertheless, the Russia's strategy in destruction of relations between Iran and Europe with the aim of maintaining the monopoly of energy exports is completely simplistic as well as short-sightedness of the depth of Iran-Russia relations in recent years.

Courtesy: Tehran Times

 

 

Bangladesh: IMF Approves US$4.7 Billion Assistance

The International Monetary Fund’s US$4.7 billion loan program won’t be a miracle worker for the Bangladesh economy. The program would hold the economy back from falling off the cliff from the whiplash of the pandemic and the Ukraine war and turn it towards the right track.

“The authorities made the right decision to come to the Fund — and most importantly, to come to the Fund early,” said Rahul Anand, the IMF’s mission chief to Bangladesh.

Turning to the IMF when the country is already in crisis could make the adjustments particularly hard on people — a situation confronting Pakistan and Sri Lanka. But Bangladesh is not in crisis, Anand said.

“Just like countries around the world, Bangladesh is dealing with the impact of global shocks — first from the pandemic and then from the ongoing war in Ukraine,” he added.

In that vein, the program’s immediate task is to prop up the country’s shrinking foreign exchange reserves, which has already hit businesses and ordinary people hard.

While the IMF would make US$476 million immediately available, the lender’s impact would be beyond that: it would give the other multilateral agencies, such as the World Bank, to make more funds available for Bangladesh.

This along with the import curbs placed by the government will shore up the gross foreign reserves to US$30 billion by the end of the fiscal year, according to the IMF’s projections.

As per the lender’s balance of payments and investment position manual (BPM6), gross foreign reserves calculation does not include the various funds that the Bangladesh Bank has formed from the reserves as well as the loan guarantees provided for Biman, the currency swap with Sri Lanka, the loan to Payra Port Authority and the below-investment-grade securities. These account for about US$7.5 billion.

When these components are taken out, the IMF projection matches the government’s expected foreign currency reserve position at the end of fiscal 2022-23: US$37.7 billion.

Gross reserves would increase to US$34.2 billion in fiscal 2023-24 and to US$40 billion in the following year, as per IMF’s projections. It would hit US$46.4 billion once the program ends.

Other than restoring macroeconomic stability by way of the reserves, the program would also give impetus to some long-due structural reforms such as raising more tax revenues, scaling up social spending, modernizing the monetary policy framework, strengthening the financial sector and building climate resilience.

“While confronting challenges resulting from the global headwinds, the authorities need to accelerate their ambitious reform agenda to achieve a more resilient, inclusive and sustainable growth,” said Antoinette Monsio Sayeh, the deputy managing director of IMF, in a press release.

Thanks to the reforms ushered in by the program, Bangladesh’s tax revenue would increase from 7.8% of GDP this fiscal year to 8.3% next year and then 8.8%. At the end of the program, it would be 9.4% of GDP, as per the IMF’s projections.

The program would insist on cutting back on subsidies, which would free up more resources for social and development spending.

“Not all subsidies are helping the poor and vulnerable. In Bangladesh where gas and electricity are being subsidized, the rich drive more cars and use more air conditioning,” Anand said.

Rationalization of untargeted subsidies will free fiscal resources to strengthen social safety nets and increase development spending.

Substantial investment in human capital and infrastructure will be needed to achieve Bangladesh’s aspiration to reach upper-middle income status by 2031 and meet the Sustainable Development Goals.

By the end of the program, the size of the annual development program would increase from the existing 5.2% of GDP to 6.5%, as per the IMF’s projections.

Public investment would increase from 8.8% of GDP this fiscal year to 11.2% of GDP in fiscal 2025-26, when the program ends. Subsequently, Bangladesh’s real GDP growth would be back to 7% by fiscal 2024-25.

This fiscal year, the growth would be 5.5%, as the IMF’s projections, which is in line with other multilateral lenders’ forecasts.

Earlier last month, the WB pared back Bangladesh’s growth forecast for this fiscal year by 1.5% to 5.2%. In December last year, the government revised down the growth forecast from 7.2% to 6.5%.

The IMF will disclose the specifics of the loan program in the coming days.

The mandatory conditions would be a minimum level of net international reserves and domestic revenue collection and a ceiling on the government’s budget deficit, The Daily Star has learnt from people involved in the negotiations with the IMF staff mission to thrash out the terms for the loan.

Implementing the income tax law, setting up an asset management company to dispose of soured loans, bringing down the banking sector’s default loans to within 10% and raising the capital adequacy ratio to the BASEL 3 requirement of 12.5%, are among the reforms agreed upon.

Periodically adjusting the fuel price through a formula and increasing remittance receipts through formal channels are also on the task list.

A social spending floor and better targeted social safety net programs, market-based exchange rate interest rate, developing the capital and bond market, expanding and diversifying exports and modernizing the monetary policy framework and reporting on net foreign reserves are the other agreed reforms.

The interest rate on the loan would be about 2.2%. Of the US$4.7 billion, US$1.4 billion can be repaid over a 20-year horizon with a grace period of ten years. The remaining amount must be paid back within ten years; the grace period for a portion of the sum is 3.5 years and for another portion 5.5 years.

 

Western companies still doing business in Russia

Fewer than one in ten Western multinationals with subsidiaries in Russia has quit any of them in the year wo22 since the Ukraine invasion began.

This finding by two highly regarded academics, Simon Evenett from University of St Gallen and Niccolo Pisani from IMD Business School, contradicts earlier reports of a mass exodus by Western businesses and points to a lack of alignment between the geopolitical strategies of Western governments and the commercial realities of Western businesses.

The study identified 1,404 companies headquartered in EU and G7 countries with a total of 2,405 subsidiaries in Russia before its February 2022 invasion of Ukraine. Only 120 of these companies, or 8.5% of the total, had exited at least one of their subsidiaries by the end of November.

Moreover, some of the companies that have trumpeted their withdrawal from Russia, such as McDonald’s and Nissan, have buy-back options. Russia’s anti-monopoly agency says McDonald’s can repossess its Russian operations within 15 years, while Nissan, which sold its business to a Russian state-owned enterprise for €1, can buy back within six years.

The study is at odds with earlier work by Yale University’s Jeffrey Sonnenfeld, which said more than 1,000 companies had pulled out, threatening Russia with economic oblivion, but it is broadly consistent with research by the Kyiv School of Economics. The latest research double-checked the prior-data bases to see whether companies that said they were withdrawing had in fact done so.

The researchers acknowledge that there are many sound reasons why companies might fail to withdraw. A Western firm operating in a sector excluded from official sanctions may decide that it is inappropriate to abandon its Russian customers, who may have played no part in the decision to invade Ukraine or in the prosecution of the armed conflict, they wrote.

In other cases, Western firms may not want to abandon long-term relationships with employees or suppliers or decide to cease operations because of the societal relevance of their products and services (for instance, the supply of lifesaving medicines).

Even when a Western firm has decided to exit and committed to do so publicly, it may still ultimately fail to do so. For instance, it may not be able to find a buyer for its subsidiary that is prepared to pay a high enough price. And even when a buyer is found and the price agreed, the Russian government may have put in place obstacles that impede or anyway delay the sale, or ultimately prevent transfer of proceeds abroad.

It can take time to conclude such sales in adverse circumstances so it is likely that the percentage quitting will rise, however the evidence shows the overwhelming majority of Western companies with operations in Russia are staying put.

US Treasury Secretary Janet Yellen has repeatedly called on the US business sector to strengthen the resilience of its supply chains by friend-shoring, or redirecting investment to allies. In the context of the risk of conflict in the Taiwan Strait, she urged US businesses to pay greater heed to geopolitical realities. We are seeing a range of geopolitical risks rise to prominence, and it’s appropriate for American businesses to be thinking about what those risks are.

However, the latest study suggests that those pressures may not translate into meaningful changes in the international footprint of companies. It is reasonable to conclude that the high cost of exiting an operation that may have taken years and billions of dollars to establish has restrained companies from following their country’s wishes, even if that means they are effectively ‘trading with the enemy.

The authors note that, if the immense geopolitical pressure on companies to decouple from Russia has been resisted, it’s unlikely that the similar pressure for companies to pull out of China will gain traction. For every US$1 invested in Russia, Western multinationals have US$8 invested in China.

They argue that the Russian economy is large enough to be a good test of the willingness of companies to respond to geopolitical pressure, while not being so large (as China’s economy is) that Russia’s future economic prospects are decisive for the global strategies of most companies.

The study found wide variation in both national and sectoral responses to the geopolitical pressure to withdraw from Russia. About 16% of US firms have closed subsidiaries, compared with 15% of British firms, 7% of Japanese firms and 5% of German firms.

Companies were more likely to close loss-making subsidiaries than those with healthy profits. The 120 companies that have shut subsidiaries in Russia represent 15.3% of the pre-invasion workforce of Western multinationals in the country but only 6.5% of the profits. The inclusion of large service firms like McDonald’s and Starbucks among the exiting firms would help to explain this difference.

In the manufacturing sector, the 50 subsidiaries that were sold or closed were responsible for 18.6% of the workforce of Western operations in the sector but only 2.2% of the profits.

The study said its finding that 8.5% of Western multinationals had exited their Russian operations was almost certainly an overestimate. Companies were counted if they had withdrawn one or more subsidiaries but not necessarily all their operations in Russia. The presence of buy-back options casts doubt on the finality of exits.

The study says greater attention should be given to the costs of decoupling and friend-shoring.

If the write-offs announced by publicly traded Western companies are anything to go by, divestment, decoupling, and supply chain reconfiguration are likely to be costly to firms, their employees, and their shareholders.

If those costs must be borne on geopolitical grounds, who should bear them? Answering this question is of the essence since to date Western corporate retreat from Russia has been limited.

 

 

China: US investors plow billions into AI sector

According to a Reuters report investors from United States, including the investment arms of Intel and Qualcomm accounted for nearly a fifth of investments in Chinese artificial intelligence companies from 2015 to 2021.

The document, released by CSET, a tech policy group at Georgetown University, comes amid growing scrutiny of US investments in AI, Quantum and semiconductors, as the Biden administration prepares to unveil new restrictions on US funding of Chinese tech companies.

According to the report, 167 US investors took part in 401 transactions, or roughly 17% of the investments into Chinese AI companies in the period.

Those transactions represented more than US$40 billion in investment, or 37% of the total raised by Chinese AI companies in the 6-year period. It was not clear from the report, which pulled information from data provider Crunchbase, what percentage of the funding came from the US firms.

Qualcomm Ventures and Intel Capital were involved in 13 and 11 investments in Chinese AI companies respectively, outpaced by GGV Capital which led US firms with 43 total investments in the sector, the data showed.

The Biden administration is expected to unveil an executive order this year curbing some US investments in sensitive Chinese tech industries, as hawks in Washington blame American investors for transferring capital and valuable know-how to Chinese tech companies that could help advance Beijing's military capabilities.

According to the report, US investor GSR Ventures invested alongside China's IFlytek Co in a Chinese AI company after the speech recognition firm was added to a trade blacklist.

Silicon Valley Bank and Wanxiang American Healthcare investments group made investments in Chinese AI firms alongside China's Sensetime before the powerhouse in facial recognition technology was added to the same trade blacklist.

Both companies were added to the blacklist, which effectively bars them from receiving US tech exports, in 2019 for alleged human rights violations related to the repression of Uighur Muslims.

Some of the largest investments include Goldman Sachs' solo investment in 1KMXC, an AI-enabled robotics company, as well as an investment by three US-based VC firms in Geek+, an autonomous mobile robot company, the report showed.

Only one Chinese AI company that received funding from US investors is involved in developing AI applications for military or public safety uses, according to CSET.

 

 

 

 

 

 

Deadly British Crimes Against Indians

The perception created by historians is that British Raj did a lot to improve the condition of masses in India. However, there is a contrary view that the Raj was a cruel and oppressive regime responsible for the deaths of an estimated 35 million Indians.

The followings are some examples of the anti-human records of British Raj in India, which has one of the blackest colonial records among Europeans.

1. Stealing of Valuable Indian Artifacts 

The list of Indian artifacts that were stolen in colonial times and are now in the United Kingdom is long. Artifacts that the British seized, looted or took away as "gifts" include the 105.6-karat "Kohinoor" diamond. Lord Harihara idol, Sultanganj Buddha, Tipu Sultan’s personal possessions, Wine cups of Shah Jahan and Maharaja Ranjit Singh’s throne are among the other treasured possessions, idols and artifacts that were stolen and looted from India years ago but still remain in the possession of the British museums and royals. Many Indians are still sensitive about artifacts that were stolen during the British conquest of India and have yet to be returned.

2. Using Indian Army in WWII 

The British colonial regime in India was heavily dependent on the Indian Army. The Indian Army that had been used by Britain during World War II fought in Ethiopia against the Italian Army, in Egypt, Libya, Tunisia and Algeria against both the Italian and German armies, and, after the Italian surrender, against the German Army in Italy. However, the bulk of the Indian Army was committed to fighting the Japanese Army, first during the British defeats in Malaya and the retreat from Burma to the Indian border; later, after resting and refitting for the victorious advance back into Burma, as part of the largest British Empire army ever formed. These campaigns claimed the lives of over 87,000 Indian servicemen, while 34,354 were wounded, and 67,340 became prisoners of war. World War II was the last time the Indian Army fought as part of the British military apparatus, as independence and partition followed in 1947.

3. Britain Tested Chemical Weapons on Indian Troops

According to a report published by the Guardian, British military scientists tested a chemical weapon on Indian colonial troops during more than a decade of experiments before and during World War II. Hundreds of Indian and British soldiers were exposed to mustard gas in tests conducted in Rawalpindi, which was then part of Britain's Indian colony.

The gas severely burned the soldiers' skin, and caused pain that sometimes lasted for weeks. Some of the soldiers had to be hospitalized. The scientists wanted to compare the effect of the gas on the skin of Indians to the results of experiments done on British soldiers.

4. British EIC Looted Bengal

Backed by a 20,000-strong military force of locally recruited Indian soldiers, in 1757 the British East India Company (EIC) became the effective rulers of Bengal and looted the territory, draining the region’s wealth into Britain. Company tax collectors in Bengal recorded that Indians were tortured to disclose their treasure; cities, towns and villages ransacked. By the end of the eighteenth century, most of India had been seized by this unregulated private company, which had expanded its army to 260,000 men by 1803. 

5. Britain Stole US$45 trillion from India

It has been estimated that Britain stole a total of nearly US$45 trillion from India during the period from 1765 to 1938. The British impoverished India through a taxation operation that equated to systematic theft. Put simply, the British exhorted high taxes in cash from the Indian population, used that tax money to pay Indians for their goods, and then exported the goods overseas and invested the profits into the British economy and a colonial army of Indian men that far surpassed India’s own defence needs.

6. Indians Died of Starvation

The British destabilized crop patterns by forced commercial cropping, and left Indians more prone to famines. Between 12 and 29 million Indians died of starvation while India was under the control of the British Empire. In response to the outbreak of famines, the British authorities rarely made relief aid, insisting that starvation was a natural and necessary check for overpopulation. During the Great Famine of 1876-78 in Madras, it wasn’t until 5.5 million Indians had already died that the British authorities began to administer any relief efforts. Instead of giving charity, the British set up labour camps for the poor where Indian workers were fed food portions that were less than 50% of the size given in Nazi concentration camps.

7. Railways in India Were Paid for Entirely by Indian Taxpayers 

The building of railways across the Raj is often misconceived as one of the gifts that Britain bestowed on India. The railways were in fact paid for entirely by Indian taxpayers, who were also forced to pay higher ticket prices than British personnel and confined to crowded third class compartments. British shareholders were able to make extortionate amounts of money by investing in the railways, without ever paying towards the system through their own taxes.

8. Jallianwala Bagh Massacre

On April 13, 1919, when peaceful protestors defied a government order and demonstrated against British colonial rule in Amritsar, they were blocked inside the walled Jallianwala Gardens and fired upon by Gurkha soldiers. Under the orders of General Dyer, the soldiers kept firing until they ran out of ammunition, killing between 379 and 1,000 protestors and injuring another 1,100, all within 10 minutes. Britain has never formally apologized for the massacre.

9. Flu Pandemic in India

India’s 1918 flu pandemic was the outbreak of influenza in India between 1918 and later in 1920. The pandemic is thought to have killed over 17 million people. When colonists from Britain arrived in India, they brought their soldiers and their war. The British ships carrying troops returning from the First World War in Europe brought the Spanish Flu with them and devastated India. Almost an entire generation of Indians was wiped out. All rivers across India were clogged up with bodies because of a shortage of firewood for cremation. 

Courtesy: Tehran Times

Pakistan: Robust vendor industry must for efficient automobile industry

The sector experts are of the consensus that the policy governing automobile industry in Pakistan has remained ‘OEM centric’ from the day one. This includes, incentives for the new entrants, lopsided indigenization policy, nominal difference in the duty rates on CKD kits and basic raw material and above all failure of the government in containing influx of parts as ‘scrap’. As a result, the vendor-industry has been fighting for its existence.

The biggest proof is that the annual turnover of the replacement market (parts market) in Pakistan is estimated around PKR35 billion. Ironically out of this only 5% is being met by the local industry. Most of the parts are imported as ‘scrap’. High-end electronic components are being ‘smuggled’. As a result local vendor fail to achieve economy of scale.

If I peep into the history, disbanding the manufacturing of Bedford trucks and buses in Pakistan is the ‘assassination’ of the units which were manufacturing engine blocks, gear, rings and pistons. This genocide was done soon after nationalization of the unit manufacturing Bedford trucks and buses in Pakistan and commencement assembly of a Japanese brand at the facility. This also led to ‘financial demise’ of Pakistan Machine Tool Factory operating in Karachi-Sindh.

Analysts also refer to the ‘absurd’ policies of the Government of Pakistan. Lately the number of OEMs in Pakistan has exceeded 18, from around half a dozen. All the new entrants were allowed to import completely built units (CBUs) in significantly large quantities and given a long period to even commence local assembly. They were also allowed to import many parts on the premise that local vendors are incapable of producing parts as per their global standards.

A question arises, if the local vendors are incapable of producing parts of international standards, who is to be blame, OEM or vendor? Sector analysts say that the GoP facilitates the OEMs the maximum because they have brought foreign investment. However, even the tier-one parts manufacturers are not given that kind of VVIP status.

At this time headlines are appearing in local media that the OEM are facing problems in opening letters of credit, due to the limited availability of the foreign exchange with State Bank of Pakistan (SBP). However, there is little talk about problems being faced by the vendors, which mostly fall in the category of SMEs and micro-enterprises. There are approximately 2,000 vendor units, which employ nearly 100,000 people.

A points which needs to be deliberated is that OMEs have borrowed heavily from the financial institutions, whereas vendor units, particularly third-tier units having the largest population and employment have invested their own money. Any deviation/concession to the OEMs to import parts which can be produced locally renders these units economically unviable.

Although, some of the readers don’t appreciate reference or comparison with India, it must be remembered that for decades it kept of models which did not have high ecstatic value, only to support the vendor units.

Another problem faced by Pakistan is that at present no steel manufacturing plant is operating in the country. Most of the units are ‘re-melting’ units which mostly use scrap. The output is below ‘prime quality’, which also lowers the quality of the body of the CBUs.

It may not be out of context to say that the two leading tractor manufacturing units face intermittent closure, because of high inventory levels. The incumbent government has allowed import of second-hand tractors, which is highly detrimental for the local manufacturers. It is ironic because the indigenization level is more than 95%.

One also fails to understand that the GoP has fixed agri lending target of PKR 1.8 trillion. The country needs use of machinery in agriculture, and tractor is the basic machine used for ground leveling, particularly laser-guided tractors. Appropriate field leveling also helps in prudent use of water, which is in short supply in the country.