Thursday, June 18, 2015

Karachi Shipyard to Get Boost From Pak Navy Modernization

Pakistan is launching domestic construction of warships, submarines and missile boats as part of its ambitious naval modernization program in collaboration with China, according to media reports.

Karachi Shipyard 

Chinese media reports have described a building program involving six of eight S-20 AIP-equipped variants of the Type-039A/Type-041 submarine under negotiation; four "Improved F-22P" frigates equipped with enhanced sensors and weaponry (possibly including the HQ-17 surface-to-air missile developed from the Russian Tor 1/SA-N-9); and six Type-022 Houbei stealth catamaran missile boats, to be built by Pakistan's state-owned shipbuilder Karachi Shipyard and Engineering Works (KSEW), according to DefenseNews.

Pakistan is expanding and modernizing its underwater fleet with 8 additional AIP-equipped submarines jointly built with China.  Mansoor Ahmed of Quaid-e-Azam University told Defense News that AIP-equipped conventional submarines "provide reliable second strike platforms, [and] an assured capability resides with [nuclear-powered attack and nuclear-powered ballistic missile submarines], which are technically very complex and challenging to construct and operate compared to SSKs, and also very capital intensive."

Expansion of KSEW in Karachi includes a new foundry, fabrication facilities to cover all aspects of ship construction, berthing facilities, and two graving docks of 26,000 and 18,000 dead weight tons, spread over 71 acres. A 7,881-ton ship lift transfer system will be completed next year. KSEW will expand to occupy facilities vacated by the Navy as it transfers from Karachi to Ormara. The Pakistan Navy Dockyard, which is adjacent to KSEW, already has facilities upgraded by the French during construction of Agosta-90B submarines.

The Pakistan Navy modernization efforts further expands existing China-Pakistan military manufacturing collaboration at Pakistan Aeronautical Complex (PAC) which has resulted in design and manufacturing of JF-17 fighter jets for Pakistan Air Force.

JF-17 Fighter Jet
In addition to designing and building military hardware together, Pakistan and China are also increasingly collaborating on manufacturing consumer appliances and products. The Pakistan-China economic corridor project includes setting up of several special economic zones for this purpose. A good example of this cooperation is Haier-Ruba special economic zone in Lahore.  Haier-Ruba joint venture in Pakistan has announced plans to start manufacturing laptops and smartphones in Lahore this year, according to the JV chairman Shah Faisal Afridi. The Haier-Ruba group is one of the largest manufacturers of polyester yarn and home appliances in the country.

The growth of both military and civilian manufacturing industries is helping to develop Pakistan's human capital and creating job opportunities for engineers, technicians and other workers.

Pakistan has taken a page from China's industrialization playbook which shows that the Chinese People's Liberation Army (PLA) led the nation's industrial growth, first with military hardware and then expanding into consumer and industrial product manufacturing.

Related Links:

Haq's Musings

Pakistan to Deploy AIP Subs For 2nd Strike

Pakistani Military Pushing Industrialization

IDEAS 2014: Pakistan's Arms Bazar

Pakistan-China Industrial Corridor to Boost FDI, Manufacturing and Exports

Haier Pakistan to Expand to Consumer Electronics

India's Israel Envy: What If Modi Attacks Pakistan?

Pakistan's Human Capital

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Tuesday, June 16, 2015

Obama Trade Deals TPP and TISA Are Good For Pakistan

US President Barak Obama is pushing legislation to gain fast track authority to negotiate Trans Pacific Partnership (TPP) and Trade in Services Agreement (TISA) as part of his pivot to Asia. TISA faces stiff opposition from Obama's fellow Democrats and organized labor who fear significant loss of American service sector jobs to other TISA member nations. Pakistan is one of the countries that will likely benefit from these trade deals.  President Obama is expected to get the authority he seeks because TPP and TISA are both supported by the pro-business Republicans who now control both houses of  the US Congress.
Member Nations of Trade in Services Agreement (TISA)


Trans Pacific Partnership is crucial for America's Pivot to Asia which is aimed at checking China's rise and maintaining America's continued relevance in Asia. It is part of America's answer to Chinese-led Asian Infrastructure Investment Bank and Silk Road fund to promote Chinese trade with Asia and Europe. China-Pakistan Economic Corridor is the first major piece of this Chinese plan. Pakistan's inclusion in TPP and TISA confirms America's continued interest in maintaining close ties with its old Cold War ally in South Asia.

Trade in Services Agreement is being negotiated among United States, European Union, Australia, Canada, Chile, Hong Kong, Iceland, Israel, Japan, South Korea, Liechtenstein, New Zealand, Norway, Switzerland, Taiwan, Uruguay, Colombia, Costa Rica, Mexico, Panama, Peru, Turkey, Pakistan and Paraguay. These countries make up about two-thirds of the global GDP.

Trade in service is being more and more important with rapid growth in services sector of the world economy. Services now account for nearly two-thirds (64%) of the world GDP with the rest coming from manufacturing (30%) and agriculture (6%). Services account for even higher percentages of GDP in US (80%) and EU (73%).

Service sector is also the largest and fastest growing sector of Pakistan's economy. Services account for nearly 60% of Pakistan's GDP while manufacturing and agriculture each contribute about 20%. It therefore makes sense for Pakistan to join multilateral trade in service deals like TISA.

A key TISA provision likely to benefit Pakistanis is ease of visa restrictions for “Movement of Natural Persons” among member nations which include the United States, the European Union, Japan, South Korea, Australia and Canada. This section discusses commitments by the parties not to place undue burdens on visas and singles out face-to-face interviews as an example of “overly burdensome procedures.” Even before this agreement is in place, there has been a growing ravel from Pakistan to US with 78,000 Pakistanis traveling to the United States on various non-immigrant visas in 2013, the most recent year for which data is available.

Other provisions of TISA would ease outsourcing of a variety of services from America and Europe to Pakistan. These include information technology services, back office services, medical, engineering, legal and accounting services. These outsourced services will help create job opportunities for hundreds of thousands of college grads pouring into the job market every year.

The US-China competition appears to be quite beneficial to Pakistan as both great powers continue to court the country through trade and investment deals. I hope Pakistani leaders will play their cards well to get the maximum help they can to build the country's human resources, infrastructure and economy.

Related Links:

Haq's Musings

Pakistan Third Most Popular Destination For Online Outsourcing

How Will Robots Impact Late Industrializers?

Pakistan Ranks in the Middle For Infrastructure and Logistics in 2014

Pak-China Industrial Corridor

India-Pakistan Economic Comparison 2014

Pakistan's Infrastructure

State Bank Says Pakistan's Official GDP Under-estimated

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan




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Tuesday, June 2, 2015

Impact of Robots On Job Creation in Bangladesh, India and Pakistan

Export oriented manufacturing industries have helped a succession of newly industrialized countries like Indonesia, Japan, Hong Kong,  Malaysia, South Korea, Taiwan and China create more and better jobs and rise from low-cost manufacturing base to more advanced, high-end exports.  



As a country's labor gets too expensive to be used to produce low-value products, some poorer country takes over and starts the climb to prosperity.  Will this formula help create more and better jobs in late industrializing countries like Bangladesh, India and Pakistan? Will programs like Indian Prime Minister Narendra Modi's "Make in India" help create more and better manufacturing jobs to bring prosperity to his country? To answer this question, let's look at a recent World Bank report. 

World Bank Report:

A 2015 World Bank report titled "Manufacturing Conundrum" says this formula of creating more manufacturing jobs for greater prosperity is unlikely to continue to work in the future. Here are two reasons it offers:

1. Labor productivity has risen faster in manufacturing than in the wider economy. Higher levels of manufacturing output are now compatible with lower levels of manufacturing employment. the following figure confirms this, showing that peak manufacturing employment shares have fallen over time. Peak output shares have not.



2. Manufacturing activity is now more apt to leave for other countries as labor costs rise. Therefore deindustrialization kicks in at lower income levels. Moreover, this premature deindustrialization is more apparent in employment than in output data. Output can be sustained in the face of rising labor costs by replacing workers with machinery. (Arvind Subramaniam and Amrit Amirapu show similar trends in industrial (manufacturing plus mining, utilities and construction) employment using repeated cross-sections of countries.)

Rise of the Robots:

A key factor this report does not fully acknowledge is the dramatic advance in artificial intelligence (AI) leading to the rise of much more capable robots.

To put this in perspective, let's understand that the industrial revolution in the West moved a lot of jobs and people from farms to factories beginning in the 18th century.  As a lot of low-cost, low-value manufacturing has moved to cheaper locations in the developing countries,  there has been a major transition from manufacturing jobs to service sector jobs in the industrialized nations. Now the application of robots on the factory floors is putting pressure on manufacturing jobs everywhere---in developed as well as developing nations.

Low-Cost Manufacturing Jobs:

Even low-cost manufacturing jobs in garment industry are being challenged by highly capable sewing robots from companies like SoftWear Automation, a textile-equipment manufacturer based in Atlanta in the American state of Georgia. Here's how Economist Magazine describes it: "The company is developing machines which tackle the problems of automated sewing in a number of ways. They use cameras linked to a computer to track the stitching. Researchers have tried using machine vision before, for instance by having cameras detect the edge of a piece of fabric to work out where to stitch".

Service Sector Jobs:

Even the service sector jobs are now threatened with increasing capacity of the robots. Following are examples of robots intended to replace service sector workers that have been described Martin Ford in a recent NPR interview to promote his book "Rise of the Robots":

Loading-Unloading Robot:

There's a company in Silicon Valley called Industrial Perception which is focused specifically on loading and unloading boxes and moving boxes around. This is a job that up until recently would've been beyond the robots because it relies on visual perception often in varied environments where the lighting may not be perfect and so forth, and where the boxes may be stacked haphazardly instead of precisely and it has been very, very difficult for a robot to take that on. But they've actually built a robot that's very sophisticated and may eventually be able to move boxes about one per second and that would compare with about one per every six seconds for a particularly efficient person. So it's dramatically faster and, of course, a robot that moves boxes is never going to get tired. It's never going to get injured. It's never going to file a workers' compensation claim.

Hamburger Making Robot:

Essentially, it's a machine that produces very, very high quality hamburgers. It can produce about 350 to 400 per hour; they come out fully configured on a conveyor belt ready to serve to the customer. ... It's all fresh vegetables and freshly ground meat and so forth; it's not frozen patties like you might find at a fast food joint. These are actually much higher quality hamburgers than you'd find at a typical fast food restaurant. ... They're building a machine that's actually quite compact that could potentially be used not just in fast food restaurants but in convenience stories and also maybe in vending machines.

News Writing Robot:

Essentially it looks at the raw data that's provided from some source, in this case from the baseball game, and it translates that into a real narrative. It's quite sophisticated. It doesn't simply take numbers and fill in the blanks in a formulaic report. It has the ability to actually analyze the data and figure out what things are important, what things are most interesting, and then it can actually weave that into a very compelling narrative. ... They're generating thousands and thousands of stories. In fact, the number I heard was about one story every 30 seconds is being generated automatically and that they appear on a number of websites and in the news media. Forbes is one that we know about. Many of the others that use this particular service aren't eager to disclose that. ... Right now it tends to be focused on those areas that you might consider to be a bit more formulaic, for example sports reporting and also financial reporting — things like earnings reports for companies and so forth.

What's Next:

Farm and factory jobs have dramatically declined forcing workers to move into the service sector. So what will happen when the service sector jobs decline? What will people do? Here are some possible answers:

Peer-to-peer economy: In a return to the era of barter economy, people will share what they have for a price. It could be a car, a room, a meal, a basic chore etc. Examples include AirBnB.com, Getaround, Etsy, Lyft, TaskRabbit

Shorter work-week: A shorter work week will alllow more people to be gainfully employed. Example: 35-hour work-week in France

Basic income guaranteed for all: First proposed by Richard Nixon in 1969 as “Family Assistance Plan”. Government will collect taxes and distribute basic assistance to allow people to subsist. If they choose to work, they can earn more money to have a higher standard of living.

Summary:

People have moved from agriculture to manufacturing to service jobs over the last two centuries. Now highly-capable robots are threatening to replace workers in all sectors. Major disruptions are likely to occur to build a new economic order that offers everyone a dignified existence in future. Such an order could be a combination of peer-to-peer economy, work-sharing through shorter work weeks and basic guaranteed income for all.  French philosopher Voltaire said: “Work saves a man from three great evils: boredom, vice and the need”. Basic guaranteed income only takes care of “the need”, not “boredom, vice”.

Related Links:

Haq's Musings

Robotics in Pakistan

Pakistan-China Industrial Corridor

Industrial Revolution Triggered Major Power Shift From East to West

Pakistan Led South Asian Job Growth 2001-2010

Silicon Valley Pakistani-Americans Enabling 2nd Machine Revolution

Pakistan 2.0: Technology Driving Productivity

3D Printing Revolution Comes to Pakistan

Is Modi's Honeymoon Over?

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