Why Gwadar airport opening was postponed?

According to media reports, Pakistan has postponed the opening of a nearly US$250 million airport over security fears, dealing another blow to efforts to boost Chinese investment in its crisis-hit economy.

Prime Minister Shehbaz Sharif was due to perform the inauguration of New Gwadar International Airport (NGIA), close to a port at the center of the US$50 billion China Pakistan Economic Corridor (CPEC).

The planned opening on August 14 — Pakistan’s Independence Day — was suddenly halted over what local officials said were security concerns after mass protests brought southwestern Gwadar to a near standstill this month.

No new opening date has been announced for the US$246 million China funded project, which got off the ground following a grant deal with Beijing in 2015.

“All the required work and prerequisite arrangements on the New Gwadar airport have been completed and it’s ready for flight operations,” a government official familiar with the situation told Nikkei on condition of anonymity.

The delayed opening — after an initial postponement last year — comes amid concerns that lower-than-expected demand for flights into the region, beset by deadly militant attacks and a separatist insurgency, would quickly turn it into a white elephant.

The single-runway airport, about 45 kilometers from Chinese-controlled Gwadar port, is spread over 4,300 acres (1,740 hectares) and can handle large-body planes like the Airbus A380. That will make it the country’s largest airport by size, ahead of Islamabad’s gateway.

Gwadar’s faltering efforts to kick off as a major hub have led to just three weekly scheduled flights to a smaller airport in the area from Pakistan’s commercial capital Karachi — and some of those trips are routinely canceled.

Even with Chinese airlines expected to start running direct flights once the new airport opens, analysts warn there’s little chance of a surge in demand.

“The inauguration of NGIA is symbolic in nature because it is not commercially viable for any airline in the short term,” Afsar Malik, an expert in airline economics, told Nikkei Asia.

Successive Pakistani governments have claimed that the multibillion-dollar investment framework with China would help turn Gwadar into the next Singapore.

The country’s prime minister ordered that half of all sea cargo for government agencies, originally destined for southern Karachi, instead be unloaded at Gwadar’s port — highlighting its underuse.

Some fear the area’s newest transport hub will become the next Mattala Rajapaksa International, a large Sri Lankan airport built with a Chinese loan that’s been dubbed the “world’s emptiest international airport” due to a lack of flights.

“Vanity projects are not new for the Chinese, they have built similar projects back home which have limited use,” said Mohammad Shoaib, an assistant professor at Quaid-i-Azam University Islamabad. “The Chinese are biding their time and the NGIA can be of use once Gwadar kicks off. … In the meantime, NGIA and old Gwadar airport can be used by other support missions from China.”

This month, Gwadar saw huge protests staged by groups pushing for civil, political and economic rights for locals in resource-rich Baluchistan province, home to the China-funded port.

Beijing has grown increasingly wary about future investment after its nationals working in Pakistan were targeted in a series of deadly attacks. The country is grappling with a rise in militant activity ranging from Islamists aiming to topple the government to separatists seeking to carve out a homeland in Baluchistan.

Islamabad, already struggling with a shattered economy, has pledged to boost security for workers and, in June, said it would launch fresh counterterror operations nationwide.

Despite hopes the new airport will draw more Chinese money, some are not convinced it would mean much for a local population of mostly poor fishermen.

“Air travel is quite expensive for the majority of people in Gwadar,” said Mariyam Suleman, a local now based in Canada. “The airport is more to accommodate the government officials, diplomats and international delegations rather than the local population.”

 

Yuan attains record share in global payments

According to the South China Morning Post, share of Chinese yuan in global payments hit a record high in July 2024, a milestone in Beijing’s efforts to fend off the hegemony of the US dollar and increase its say in the global monetary system.

The yuan kept its fourth-place spot in the ranking of payment currencies last month, with its share of global transactions rising to 4.74% from 4.61% in June. The increase was observed in data from the Society for Worldwide Interbank Financial Telecommunication (Swift), the world’s largest interbank messaging service.

It was the ninth consecutive month the Chinese currency has stayed above 4%.

Swift payment data is a major indicator for the relative status of international currencies. Other metrics include frequency of use in foreign exchange markets, commodity trading and governments’ foreign reserves.

The data shows the value of payments settled in yuan increased by 13.4% as compared to June, outpacing the 10.3% growth recorded across all currencies.

The world’s second-largest economy first encouraged the use of its currency in international trade settlements in 2009, part of its response to the global financial crisis.

Yuan usage has been on the rise since Russia was ejected from the US dollar system after its invasion of Ukraine in February 2022. A vast majority of China and Russia’s US$240 billion trade last year was settled in either yuan or roubles.

Beijing’s policymakers have continued to promote the yuan as an alternative currency in international trade, as the perceived weaponisation of the US dollar against Russia has sent chills through emerging markets. In response, countries such as Brazil have expressed a greater openness to accepting Chinese currency.

“Despite depreciation pressures, the yuan’s internationalization has advanced this year, with its overseas use on the rise,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.

Standard Chartered’s renminbi globalization index, which also tracks the yuan’s international use, continued to grow this year after a strong 33 per cent% increase in 2023 in alignment with Swift data.

The yuan surpassed the Japanese yen as the world’s fourth most active currency in global payments in November 2023, following the US dollar, euro and pound sterling.

In July 2024, the US dollar accounted for 47.8% of global payments, followed by the euro at 22.5% and the pound sterling at 7.0%, Swift data showed.

The yuan also secured the No. 2 position in the trade finance market with a 6% stake, higher than the euro’s 5.8% and second to the US dollar’s considerable share of 83.2%.

As the Global South looks to avoid overreliance on the US dollar amid rising geopolitical tensions, Ding said, the yuan is well-positioned to expand its global role.

But he also pointed out the inherent difficulty of further breakthroughs after the yuan’s internationalization reaches a certain level, considering the state of the country’s capital controls.

“To strengthen confidence in the yuan, the currency’s exchange rate but also the openness of cross-border capital flow must play a role,” he said, stressing the latter was not being prioritized sufficiently by Beijing.

“Currently, China is more focused on stability amid growing external uncertainties. But in the long term, Beijing will need to further relax its controls over capital accounts.”

 

Ships carrying Israeli cargo being targeted

An oil tanker has been forced to change route after coming under attack by Yemen’s Ansarallah in the Red Sea. The Greek-flagged SOUNION has been accused of violating the Ansarullah decree banning entry to the ports of occupied Palestine.”

In a televised statement, Yahya Sare’e said the oil tanker “belongs to a company that has ties with the Israeli enemy”. 

The ship was accurately and directly struck while sailing in the Red Sea and is at risk of sinking, according to the senior Yemeni military official. 

Global maritime monitors say the SOUNION was targeted by multiple projectiles off Yemen’s port city of Hodeidah. 

The European Union’s naval forces in the region, deployed to prevent Ansarullah’s operations, said the tanker was carrying 150,000 tons of crude oil, and the attack from Yemen led to the loss of engine power while causing a fire on board. 

The SOUNION is now reportedly anchored near Eritrea amid plans to move it to a safer destination for checks and repairs. 

None of the crew members who were evacuated have been harmed. 

Sare’e also declared that Ansarullah staged a second operation, which targeted the SW NORTH WIND I, reiterating that this vessel also belongs to a company that “deals with the Israeli enemy” and “violated the decision to ban entry to the ports of occupied Palestine.” 

This ship, too, was directly and accurately hit while sailing in the Gulf of Aden and the Red Sea, the Ansarullah military spokesman said. 

Maritime monitors say the SW NORTH WIND I suffered damage after an encounter with an uncrewed vessel 57 nautical miles south of Yemen’s port of Aden. 

Ansarullah said the attacks in the Aden Gulf and the Red Sea were carried out with unmanned boats, ballistic missiles, winged missiles, and drones. 

“Our operations will continue until the aggression ceases and the siege on Gaza is lifted, and we will continue to prevent all ships heading to Israel until the blockade on the Gaza Strip is lifted,” Ansarullah added. 

Since November, the Sana’a government forces have carried out scores of attacks against Israeli and Israeli-affiliated vessels in the Red Sea and beyond. 

The arrival of American and British destroyers in the region has failed to deter the Yemeni forces. Bombing attacks by United States and British forces have seen ships and warships belonging to America and Britain also come under attack. 

Ansarullah has waged more than 184 attacks against Israeli, American and British ships in solidarity with Gaza. 

The Sana’a government has informed mediators that its operations will end once a ceasefire is reached in the Gaza Strip and the blockade on the enclave is lifted. 

According to experts, Ansarullah’s military actions have proven very effective amid a significant drop in the number of US and British ships, and ships bound for Israeli ports in the Red Sea. 

The presence of Western warships and the regular bombings on Yemen by America and Britain have failed to weaken or stop Ansarullah’s maritime ban on ships docking at Israeli ports. 

Analysts have said the US-led military failure to end the Red Sea maritime disruption for Israeli-linked ships is all the more embarrassing for the United States, considering that Ansarullah has been subject to almost a decade of war. 

On Friday, Yemenis heeded a call by Ansarullah leader, Abdul-Malik al-Houthi, in a remarkable show of support. People flooded the streets of the capital as well as the governates of Sa’ada, Hodeidah, Hajja, Dhamar, Amran, al-Bayda, Rima, al-Dhalea, Lahij, Ibb, al-Mahwit, al-Jawf and Marib with million-man marches voicing their approval of the government’s policies on Palestine. 

The huge weekly turnout on Fridays, across Yemen has led critics to accuse other Arab states of failing to organize a similar level of street protests against the Israeli massacres in the occupied Palestinian territories. 

The popular domestic support in Yemen has also helped strengthen the determination of Ansarullah to continue its military operations in support of the people and resistance in Gaza. 

 

Has United State become a proxy of Israel?

In our opinion Israel has become a monster that United States, European Union, China, Russia, France, Britain, United Nations and even International Court of Justice have failed to control. The resistance forces are told not to react, else it will be terrible destruction throughout the Arabian Peninsula. It seems certain that United State has become a proxy of Israel and all others have gone impotent.

According to media reports, Israeli forces have reduced the designated "safe humanitarian zones" within the Gaza Strip to mere rubble, leaving only 9.5% of the territory as areas for displaced civilians to seek refuge.

During Israel's ground invasion of Gaza, which began in early November 2023, Israeli forces pushed hundreds of thousands of civilians from northern to southern Gaza, declaring these areas as "safe humanitarian zones."

Initially, these zones spanned 230 square kilometers (89 square miles) or 63% of Gaza's total area, including vital agricultural, commercial, and service facilities.

As the Israeli military offensives continued, these zones were drastically reduced. By early December 2023, after Israel's incursion into Khan Younis, the zones shrank to 140 square kilometers (54 square miles), representing 38.3% of Gaza's area.

The size further decreased in May 2024, during the incursion into Rafah, down to 79 square kilometers (30.5 square miles) or 20% of the area.

By mid-June 2024, the so-called safe zones were reduced to just 60 square kilometers (23 square miles), representing 16.4% of Gaza.

By mid-July 2024, the area deemed "safe" was further reduced to 48 square kilometers (18.5 square miles), or 13.15% of Gaza's total area.

Finally, as of August 2024, the "safe humanitarian zones" have been diminished to just 35 square kilometers (13.5 square miles), accounting for only 9.5% of Gaza's total area.

This remaining area includes only about 3.5% of agricultural, service, and commercial areas, severely limiting safe havens for civilians.

This systematic destruction of the designated safe zones has intensified the humanitarian crisis in Gaza, leaving civilians with fewer places to escape the ongoing violence.

The continued Israeli offensive on Gaza, which began after October 07, has led to over 40,200 Palestinian deaths, primarily women and children, and more than 93,000 injuries.

The region faces a dire shortage of food, clean water, and medicine due to an ongoing blockade, exacerbating the humanitarian catastrophe.

Israel faces proceedings for the genocide at the International Court of Justice, which has ordered a halt to military operations in the southern city of Rafah, where over one million Palestinians had sought refuge before the area was invaded on May 06, 2024

Red Sea Crisis Top Concern

In the most recent poll on Seatrade Maritime News, majority of readers said that attacks on commercial ships in the Red Sea was their top concern, likely to impact their business the most in the second half of 2024.

The attacks that started in late 2023 have seen a large number of vessels re-routing via the Cape of Good Hope, adding significantly to the length of voyages between Asia and Europe, the Mediterranean Sea and the Middle East.

Readers were given five options: Port congestion, Houthi attacks on ships in the Red Sea, cybersecurity, compliance with regulations, and availability of qualified seafarers.

A majority of readers, 52%, said that Houthi attacks on commercial ships in the Red Sea was their top concern.

Interestingly, diversions have in many cases proved beneficial to shipping markets but have also added to fuel costs and emissions.

For vessels that continue to transit the Red Sea the threat of attack from the Houthi continues with ships often subject to multiple attacks from both air and sea.

The second top concern among readers, some 27% was port congestion, an issue which in some cases can also be linked to the disruption caused by the Red Sea crisis.

Of the three other issues 10% put compliance with new regulations as their top concern, 6% the availability of qualified seafarers, and 5% cybersecurity.

 

PSX witnesses 27%WoW increase in trading

Pakistan Stock Exchange mostly maintained a positive momentum throughout the week ended on August 23, 2024, primarily driven by declining T-Bills yield and favorable corporate results. The benchmark index closed the week at 78,801 points, up 756 points or 1.0%WoW. Market participation surged by 27%WoW, with the average daily traded volume rising to 468 million shares from 368 million shares a week ago.

In Wednesday’s T-Bills auction, cut-off yields witnessed a significant decline, which brought the 3-month yield down to 17.49%, indicating market expectations of a rate cut exceeding 100bps in the upcoming Monetary Policy Committee (MPC) meeting scheduled for September 12, 2024. These expectations of rate cut led to the rerating of high dividend yielding stocks, notably FFC and UBL.

Additionally, NBP stood third in terms of index points contribution, driven by expectations of lower-than-expected provisioning related to pension case in its upcoming financial results.

Pharmaceutical sector also performed well, buoyed by better than anticipated financial results by the players, supported by the deregulation of non-essential drugs.

On the macro front, the anticipated timeline for IMF Executive Board approval was pushed to September from the previous August due to unmet debt rollover requirements.

The Finance Minister remains optimistic about securing Board’s approval by next month. The current account remains in control, reporting deficit of mere US$162 million for July 24, big thanks to remittances.

PKR largely remained stable, closing the week at PKR278.50/US$.

Major news flows during the week included: 1) July FDI inflow in July was up 64%YoY to US$136.3 million, 2) LSM sector in FY24 grew 0.92%YoY, 3) RDA attracted US$161 million in first month of the current financial year, and 4) Banking sector deposits increased 19% to PKR30.6 trillion in July 2024.

Woollen, Jute, and Leather and Tanneries were amongst the top performing sectors, while Tobacco, Automobile assembler, and Textile weaving were amongst the worst performers.

Major net selling was recorded by Insurance companies with a net sell of US$6.3 million. Mutual, Banks and Companies absorbed most of the selling.

Top performing scrips of the week were: NBP, PGLC, SRVI, HINOON, and BNWM, while top laggards included: YOUW, CEPB, SML, ISL, KTML.

Looking ahead, market is expected to continue its positive momentum due to August 2024 lower inflation reading, upcoming MPC outcome and positive development on the IMF negotiations.

AKD Securities opines that sectors benefiting from monetary easing and structural reforms would remain in the limelight. Additionally, with declining fixed income yields, high dividend-yielding stocks are expected to remain in focus.

Germany: NATO air base on high security alert

A major NATO air base in Germany is maintaining a high security alert on Friday, according to a military spokesman.

“At the moment we are still at alert state Charlie,” Donny Demmers, a spokesman for NATO Airbase Geilenkirchen said, noting that the security situation is being closely monitored.

Security alert “Charlie” is implemented at NATO bases when there is an incident or intelligence suggests a likely terrorist action or targeting of personnel or facilities.

The airbase heightened its security level on Thursday based on intelligence indicating a potential threat.

“All non-mission essential personnel have been sent home as a precautionary measure. The safety of our staff is a top priority. Our critical operations will continue as planned,” Demmers said.

The Geilenkirchen base, near the western city of Aachen, houses NATO’s AWACS surveillance aircraft, which provide air and sea surveillance and serve as a flying command center in combat operations.

In recent years, NATO AWACS aircraft have conducted hundreds of flights over Eastern Europe to monitor Russian military activity near the alliance’s borders.