Comment by Riaz Haq on December 30, 2021 at 1:52pm

Textile manufacturers seem to have gotten their way securing gas supply for captive power generation. The note of thanks that followed had one name missing, that of the Minister that was not entirely sold on the idea. Regardless of the merits of the decision, this should soothe some nerves for Pakistan’s largest dollar earners.

https://www.brecorder.com/news/40143546

The arguments goes that “textile units in Pakistan are incurring power and energy costs 2.4 percentage points more than India and 7.8 percentage points higher than Bangladesh…ideal regionally competitive electricity tariff would be around 7.4 cents/kWh”. There is no denying that textile is an intensely competitive market when it comes to export, and regionally competitive electricity tariff is only a fair demand.

Only that a look at electricity tariffs for industries in the region tells the textile players in Pakistan are not worse off. If anything, they get better power tariffs than both India and Bangladesh, where only Vietnam offers electricity at cheaper rates – even at 9 cents per unit. The research being quoted by the textile lobbyists may well be outdated, as the very sources mentioned in the research indicate that electricity tariff for industries in Bangladesh are close to 11 cents, whereas those in India are north of 10 cents per unit.

In terms of natural gas, there is a clear advantage that competitors have over Pakistani textile players, based on PIDE’s research titled “Regionally Competitive Energy Tariffs and Textile Sector’s Competitiveness” from 2020. BR Research has not been able to independently verify the same. That said the overall picture in terms of regionally competitive tariffs is not as bleak as some representative bodies of the textile sector would paint. Surely, the power tariffs are nowhere close to 7.4 cents, which is being termed as “ideal”.

The second most significant element in conversion cost is labor, which accounts for roughly 29 percent as compared to 35 percent of power and fuel, as per PIDE’s aforementioned research. Pakistan’s labor rates are 80 percent lower than that of India and only 12 percent cheaper than that of Bangladesh. Given the massive currency depreciation in the past two years, the labor wages in dollar terms have only tilted more in favor of Pakistan - as no other currency in the region has seen such a hammering.

As per data provided by the Punjab Bureau of Statistics, wages in textile sector have grown at an average of 2 percent every quarter in rupee terms, since 1QFY19. The data presented in the “Monthly Survey of Industrial Production & Employment in the Punjab” puts the average monthly wage at Rs18,608 per worker in the industry.

The disregard to minimum wage law is best left for another day, but even if one assumes wage rate to have outgrown historic average of 8 quarters, growing by 4 percent quarter-on-quarter instead, the wage rate in dollar terms comes at $115. This is still lower than what it was 12 quarters ago, having seen the lows of $102 during the journey. Granted that the LSM approach will have shortcomings in terms of inclusion, but it is difficult to see the ground reality deviating any significantly from the trend.

One can safely say that Pakistan’s textile is getting electricity at better rates than India and Bangladesh, even though gas is still pricier – which may or may not put Pakistan at par in terms of regionally competitive energy tariffs. One can say with a greater degree of certainty that the rupee hammering has given a head start to Pakistan in terms of labor costs. Let’s not even go into the concessional financing schemes out there. But surely, based on these numbers, this is as competitive as it gets for Pakistan. It is now up to the industry to prove the mettle and show the growth.

Comment by Riaz Haq on May 21, 2022 at 8:28am

Is #Bangladesh heading toward a #SriLanka-like #economic crisis? #Imports surging to reach $85 billion this year, #exports $50 billion. $35 billion trade deficit, leaving $10 billion current account deficit after #remittances. #energy #food #inflation https://www.dw.com/en/is-bangladesh-heading-toward-a-sri-lanka-like...

Like Colombo, Dhaka has also taken on massive foreign loans to embark on what critics call "white elephant" projects. The economic turmoil in Sri Lanka should serve as a cautionary tale, say experts.

Sri Lanka has been mired in economic turmoil over the past few months, with the country battling severe shortages of essential items and running out of petrol, medicines and foreign reserves amid an acute balance of payments crisis.

The resulting public fury targeting the government triggered mass street protests and political upheaval, forcing the resignation of Prime Minister Mahinda Rajapaksa and his Cabinet, and the appointment of a new prime minister.

Many in Bangladesh fear that their country could face a similar situation, given the rising trade deficit and foreign debt burden.

Bangladesh imported goods worth $61.52 billion (€58.48 billion) in the first nine months of the 2021-2022 fiscal year, a rise of 43.9% compared to the same period last year.

Exports, however, rose at a slower pace of 32.9% while remittances from Bangladeshis living abroad — a key source of foreign exchange — dropped about 20% in the first four months of 2022 from the year before, to $7 billion.

'Foreign reserves will go down to a dangerous level'
Muinul Islam, a Bangladeshi economist and former professor at Chittagong University, fears that the trade deficit could grow in the coming years as imports are increasing at a faster pace than exports.

"Our imports are set to reach $85 billion by this year, while exports won't be more than $50 billion. And, the trade deficit of $35 billion can't be bridged by remittances alone," Islam told DW, adding: "We will have to live with around a $10 billion shortfall this year."

The expert also pointed out that Bangladesh's foreign exchange reserves have fallen from $48 billion to $42 billion over the past eight months. He is worried that they may drop further in the coming months, likely down another $4 billion.

"If the trend of more imports against exports continues and we fail to minimize the gap with the remittances, our foreign reserves will go down to a dangerous level in the next three to four years," he stressed, underlining that this would lead to a significant devaluation of the nation's currency against the US dollar.

Massive loans for 'white elephant' projects?
Bangladesh, like Sri Lanka, has also taken on foreign loans in recent years to fund what critics call "white elephant" projects, which are expensive but totally unprofitable.

These "unnecessary projects" could cause trouble when the time comes to repay the debts, Islam said.

"We have taken a loan of $12 billion from Russia for a nuclear power plant which has a production capacity of just 2,400 megawatts. We can repay the debt in 20 years but the installments will be $565 million per year from 2025," he pointed out. "It's the worst kind of a white elephant project."

In total, the country will likely have to repay $4 billion per year from 2024, as installments for foreign loans, Islam estimated.

"I fear Bangladesh won't be able to repay those loans at that time because of the shortage of income from the mega projects," he stressed.

Comment by Riaz Haq on September 17, 2022 at 7:02pm

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

https://www.hindustantimes.com/opinion/the-ground-under-sheikh-hasi...

Bangladesh's foreign minister
AK Abdul Momen arrived in
India last month to fight polit-
ical fires. But he found himself
dealing with massive floods
that hit Sylhet and Assam.
Nature has its ways to convey
that not all is well in India's
near-east. Far from the glitz
about Bangladesh's economic
success, on display during the
recent inauguration of the
Padma Bridge, clampdown on
Islamists, and shrewd man-
agement of big power rivalries,
is a parallel potent reality of
Prime Minister Sheikh Has-
ina's authoritarianism,
heightened polarisation, and
economic distress. As an
Indian official mentioned to
me, and a Bangladeshi official
echoed. Hasina "has built a
house of cards"
The economic, social, and
political ground under Has-
ina's feet is shifting in real
time. It is slow enough to be
dismissed as non-urgent, but
sure enough to become press-
ing, if not dealt with urgently.
With general elections due in
2023, and external debt repay-
ment schedules kicking in
from 2024, it is a matter of
time for the veneer of (forced)
stability to lose its sheen. The
risk of dislocation, if not col-
lapse, of this so-called house
of cards has increased in
recent years, and it could
undermine whatever is left of
India's connectivity aspira-
tions in its near east.
Domestically, the Hasina gov-
ernment has exacerbated two
contradictions in a tradition-
ally polarised polity. One, she
is in power, but with little to
no electoral legitimacy. The
Awami League's (AL) manipu-
lation of the 2014 and 20118
elections (a practice not just
reserved for national elections
and against opponents),
unceasing harassment of its
key opponent, the Bangladesh
Nationalist Party (BNP), gag-
ging of media, social media
monitoring using advanced
digital surveillance, and a
forced tilt towards the conser-
vative Islamic Right as a bal-
ancing move after targeting
these formations using force,
has created wide pockets of
intense frustration.
Unlike her father, Sheikh
Mujibur Rahman, who created
a one-party State, but failed to
contain a famine in 1974, Has-
ina has placed her bets on eco-
nomic development. The argu-
ment runs that good economic
performance coupled with lib
eral use of force will make a
one-party State under Has-
ina's leadership sustainable.
But this is where the second
contradiction kicks in.
Bangladesh's external debt to
Gross Domestic Product ratio
has increased to 21.8%, import
spending has shot up by nearly
44%, forex reserves of $42
billion are falling and can
cover about five months'
worth of imports, and the rev-
enue from readymade gar-
ments export and remittances
is not keeping pace with the
fast rising costs to the
exchequer.


Couple this with the global
inflation created by the Rus-
sia-ukraine war and United
Statesled sanctions, and it
becomes clear why Momen is
asking India to remove anti-
dumping duties on Banglade-
shi jute exports. Further com-
plicating this situation is
Dhaka's propensity to accept
external loans for infrastruc-
tural projects at highly inflated
costs, making repayment dif-
ficult. One of the cases in point
is the 2015 Rooppur Nuclear
Power Plant deal with Russia
for which Dhaka is to repay
$13.5 billion. India paid $3 bil-
lion for a similar plant in
Kudankulam.
Why does Dhaka accept such
deals? Because external fin-
ance fuels (limited) infra-
structural growth, chronic
corruption, and keeps the
political illusion of economic
development alive. To be clear
and fair, Bangladesh's eco-
nomic journey has been more
than commendable. But to
expect an economic miracle,
which is bound to dwindle due
to internal or external shocks,
to sustain a corrupt system
pretending to be a democracy
is a tall ask. Herein, Hasina has
ensured that neither the
Islamists nor the BNP
which enjovs public sympathy,
even if it may not get a fair
election - pose a serious
challenge to her.

Comment by Riaz Haq on September 17, 2022 at 7:03pm

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

https://www.hindustantimes.com/opinion/the-ground-under-sheikh-hasi...

But her real challenge doesn't
come from known opponents.
It comes from opaque factions
within a securitised State (and
the party) that has made so
much illicit profit that being
out of power is not an option
for them. This leaves Hasina
with an unenviable dilemma.
Either she allows free elections
and risks being ousted or
manipulates them and invites
international opprobrium that
could unleash mass protests
and violence. Bereft of a clear
succession plan, both these
scenarios could tempt oppor-
tunistic adversaries to force a
regime change, of which there
is an unfortunately rich his-
tory in Bangladesh.
Hasina's internal problems are
linked to external dependen-
cies. Politically reliant on New
Delhi, she is finding it increas-
ingly difficult to manage the
ramifications of India's turn
towards Hindu nationalism
that misuses migration from
Bangladesh and the Rohingya
crisis for domestic electoral
gain. Similarly, accepting of
Chinese finance that may not
translate into political sup-
port, Dhaka is struggling to
keep targeted US sanctions
against the Rapid Action Bat-
talion, an anticrime and anti-
terrorism unit of the
Bangladesh Police, for serious
human rights violations, at
bay. Dhaka's replacement of
its ambassador in Washington
DC after a visit by a team of AL
parliamentarians from the
standing committee on foreign
affairs will make little differ-
ence in how the US deals with
Bangladesh.
Add to this, an uptick in
demand for repatriating
Rohingya migrants - some of
whom have been silently
resettled in the Chittagong Hill
Tracts to the locals' displeas-
ure - to Myanmar, including
within Bangladesh's military
establishment, and the situ-
ation becomes even more
volatile. Hasina requires a
political off-ramp to prevent a
foreseeable crisis that can turn
violent. The last thing the sub-
continent needs is turmoil in
Bangladesh

Comment by Riaz Haq on April 28, 2023 at 2:07pm

America Pays a High Price for Low Wages

https://www.wsj.com/articles/america-pays-a-high-price-for-low-wage...

For decades the U.S. has used wage subsidies to support the country’s lowest-paid workers—a welfare system that keeps the poor down, primarily benefits the wealthy and undermines technological innovation.

In “The Wealth of Nations,” the founding text of free-market economics, Adam Smith took it for granted that workers should be paid enough to cover the living costs of themselves and their dependents. “A man must always live by his work, and his wages must at least be sufficient to maintain him,” wrote Smith. “They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.”

In the last half-century, policy makers of both parties in the U.S. have successfully refuted Adam Smith. It turns out that it is indeed possible to pay wages to workers that are too low for their own maintenance, much less that of their families. This depends on using means-tested welfare programs like the earned-income tax credit (EITC), food stamps and housing vouchers, all of which compensate for wages that are too low for workers to live on.

Since its creation in 1975, the EITC, a federal wage subsidy for low-income workers and their children, has been expanded repeatedly under Democratic and Republican presidents alike. Many states also have their own versions of the EITC. Liberals like the EITC because it reduces absolute poverty, and conservatives like it because it attaches a work requirement to welfare.

But it is a myth that wage subsidies like the EITC “make work pay.” On the contrary, they make taxpayers pay to rescue workers whose work does not pay enough. Nor are such wage subsidies an alternative to welfare. They are welfare in the form of cash rather than in-kind benefits like food stamps or housing vouchers. The term “refundable tax credit” is just a euphemism for redistributing income.

Wage subsidies also entangle eligible workers in the operations of the welfare state and its complex paperwork. It is puzzling that many critics of big government support the EITC, a costly federal welfare program that partly socializes the incomes of millions of American workers and makes their employers reliant on government spending.

We can call the current American labor market system the low-wage/high-welfare model. It is a success from the perspective of employers who get to pay lower wages. It is also a success for some consumers, since lower wages mean lower prices. The losers include taxpayers, the working poor themselves and workers who are not poor but fear poverty. The low-wage model also saps the incentives for technological innovation, because cheap labor so often substitutes for labor-saving machinery.

Comment by Riaz Haq on June 1, 2023 at 4:07pm

Fashion cycles are moving faster than ever. A Quartz article in December revealed how fashion brands like Zara, Gap and Adidas are churning out new styles more frequently, a trend dubbed "fast fashion" by many in the industry. The clothes that are mass-produced also become more affordable, thus attracting consumers to buy more.

"It used to be four seasons in a year; now it may be up to 11 or 15 or more," says Tasha Lewis, a professor at Cornell University's Department of Fiber Science and Apparel Design.

The top fast fashion retailers grew 9.7 percent per year over the last five years, topping the 6.8 percent of growth of traditional apparel companies, according to financial holding company CIT.

Fashion is big business. Estimates vary, but one report puts the global industry at $1.2 trillion, with more than $250 billion spent in the U.S. alone. In 2014, the average household spent an average $1,786 on apparel and related services.

https://www.npr.org/2016/04/08/473513620/what-happens-when-fashion-...

--------------

See the World's Unsold Clothing in a Huge Desert Pileup


A satellite image shows where tons of fast-fashion items are heaped in a clothing graveyard in the Atacama Desert

https://gizmodo.com/clothing-pile-chile-atacama-desert-satellite-im...

The world’s fast-fashion addiction is wrecking the planet. It’s also contributing to an enormous and growing pile of clothing that is sitting in Chile’s Atacama Desert.

SkyFi, a company that provides access to satellite imagery, recently shared a striking view of the Atacama Desert. The company explained in a blog post last week that members of its Discord channel had helped find the coordinates for the growing graveyard of trashed garments.

Comment by Riaz Haq on November 7, 2023 at 4:56pm

Bangladesh's government announced a higher minimum wage for garment workers on Tuesday, raising it 56% to about $113 per month.

https://www.voanews.com/a/bangladesh-increases-garment-workers-mini...'s%20government%20announced%20a%20higher,dead%20and%20several%20more%20injured.

The new wage comes after weeks of violent protests by workers demanding higher salaries, which left two workers dead and several more injured.


The wage increase, which was agreed upon by a panel of factory owners, union leaders and officials, has been criticized as too small, with inflation in Bangladesh running at about 9.5%, increasing the price of basic needs.

Protesting workers have demanded a wage of $208 per month. Demonstrators have clashed with authorities and attacked factories.

The demonstrations were sparked when the Bangladesh Garment Manufacturers and Exporters Association offered to increase wages 25% to only $90 per month.

Low wages in Bangladesh factories have led to the growth in the country's garment industry as garment production and exports account for nearly 16% of Bangladesh's GDP.

Bangladesh employs 4 million workers across 3,500 factories and is currently the second-largest garment-producing nation behind China. The country's factories supply many large clothing brands such as H&M and Gap.

Factory owners have hit back at the protesters' demands, saying that production costs are higher because of rising energy and transportation costs, and that Western brands are offering to pay less for production.

Bangladesh, having primarily focused on exporting to Europe and the United States, is looking to find markets in China, India and Japan.

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