Pakistan presents plan to address Rs1.6 trillion gas circular debt to IMF

Morning! It’s official: a long weekend with Monday off is much better than with Friday off. Time to shift those "sick days" and "dentist appointments" to Mondays now...

P.S. Happy belated Independence Day, folks ☪💚

In this week’s edition:

👠 Clock striking midnight for China

💰 How to pay back Rs. 1.6 trillion loan?

📈 Too hot to handle

⚖ New laws, new concerns

- The Itla Squad 💼

Business

Global 🌎️

China’s economic ball: Is the clock striking midnight on its good days?

China's makeover from a rural farm scene to a bustling industrial hub has been a real Cinderella story. But just like the clock struck midnight for Cinderella, the days of big factories and mega-construction seems to be numbered.

The annual GDP growth rate, which used to be on steroids, is now looking at around 4% – only slightly higher than developed countries.

What’s to blame: 

• Changing Industries: China's been the world's factory, but the party's slowing down. The spotlight's now shifting to services and information industries, changing the game and posing new economic challenges.

• Debt trouble: China went on a construction spree, and local governments footed the bill. The result? A mountain of debt, possibly reaching a whopping $20 trillion.

• Politics in the mix: China's economy has been politicized with the increased influence of the Communist Party in corporations and state-run firms leading to decreased domestic productivity and making foreign investment less attractive.

• One-child policy: China's decades-long one-child policy has led to a shrinking and aging population and is having significant economic implications like having limited young people to drive up the economy.

So where’s the manufacturing happening now? Factories are packing up and hitting the road, with countries like Vietnam as their new destination. Why? Because it's cheaper to do business there – lower land prices, wages, and operational costs.

Looking ahead: While a 5% growth is predicted this year, experts say that failure to address these concerns could lead to growth stagnation of around 3% over the next decade…

TLDR: China’s massive factories and rapid growth is waning, with GDP now around 4%. Factors include the one-child policy causing an aging population, a shift to services, mounting debt from local government-led construction, and politics impacting productivity and foreign investment. Manufacturing is moving to countries like Vietnam for cost efficiency.

What else is new in news

✶ In India's Subway, cheese comes at a cost now. The chain's tweaking its menu, charging 30 rupees (about $0.40) for that cheese slice but throwing in a free "cheezy" sauce instead. Analysts are calling it more of a cost-saving move than a palate preference.

Local 🇵🇰

How to pay back Rs. 1.6 trillion loan?

Pakistan's got a game plan to deal with its hefty gas sector circular debt, around Rs1.6 trillion, and it's shared it with the International Monetary Fund (IMF).

All about the plan: It’s about mixing up the finances and adjusting dividends, with a gradual rollout over a few quarters. The goal? Handle the debt slowly while giving a boost to the energy sector and the economy.

• Shaking up finances: One big move in this plan is pumping around Rs414 billion into Sui Northern and Sui Southern gas companies that will help to settle up dues owed to gas giants like Oil & Gas Development Company Ltd (OGDCL), and Pakistan Petroleum Ltd (PPL).

• Dividends: In return for getting this financial help, OGDCL, and PPL are set to give the government about Rs475 billion from their profits, cutting the debt by about Rs543 billion.

• Rise in prices: And obviously, the government is considering bumping up gas rates by 45-50%, which could bring in about Rs121 billion for SNGPL and Rs105 billion for SSGCL during the fiscal year.

• Going WACOG: Pakistan is also joining forces with the World Bank to get on the same page about pricing for local and imported gas and using a weighted average cost of gas (WACOG) plan.

TLDR: Pakistan's tackling its gas sector debt of about Rs1.6 trillion with a plan shared with the IMF. The plan includes infusing Rs414 billion into gas companies, OGDCL and PPL giving Rs475 billion in dividends, and considering a 45-50% gas rate increase. Partnering with the World Bank, Pakistan aims to streamline gas operations, cut costs, and improve efficiency.

News Flash

✶SECP (Securities and Exchange Commission of Pakistan) has introduced term limits for CEOs in major finance institutions like PSX, NCCPL, and PMEX. CEOs can serve up to three terms, with a third term based on exceptional performance and fair selection.

Tech

Global 🌎️

Nvidia GPUs: Too hot to handle

The buzz around AI technologies like ChatGPT has set off a frenzy for Nvidia's graphic processing units (GPUs), resulting in a dazzling earnings performance and a valuation crossing the $1 trillion mark.

The AI party is in full swing, and Nvidia's GPUs are the hottest invite: Chinese tech giants are snapping up $5 billion of their chips. Elon Musk has been snapping up thousands of chips for his ambitious AI project, xAI, and he's even said that Twitter (now X) and Tesla are in on the action too.

Econ-101 was right - the supply-demand rule is real. With demand on the rise, the delicate balance of supply and demand could be tilting. Executives are openly expressing their concerns, as the risk of surpassing supply raises worries about potential shortages.

As they say, it’s lonely at the top: Earning a spot in the "Magnificent Seven" tech stocks club might be cool and all, but it also means a lot of eyeballs are on them. With AI tech continuing to climb, Nvidia's got to keep those GPUs coming to stay ahead of the game.

TLDR: The AI boom has sent Nvidia's GPUs into high demand. Chinese tech giants and Elon Musk are buying billions worth of Nvidia's chips, showcasing their vital role in AI advancement. Yet, this surge raises concerns about shortages, as executives worry about supply.

What else is new in news

✶The bad blood between China and US isn’t gonna go away anytime soon. The Biden administration's new rule has put a cap on American private equity and venture capital investments in Chinese tech.

Local 🇵🇰 

New laws, new concerns (Media edition)

The Pakistani federal cabinet's recent nod to critical pieces of legislation holds immense significance, with anticipated ripple effects on digital rights, e-commerce, and the overall digital economy of the nation, and not everyone is cool with that.

What’s brewing: The legislation includes:

• Amendments to PECA: One of the significant proposals involves amendments to the Prevention of Electronic Crimes Act 2016 (PECA). which includes making the dissemination of "fake and false information" punishable.

• eSafety Authority Bill: The E-Safety Bill 2023 takes aim at online crimes like cyberbullying. The cabinet gave the green light for 'The E-Safety Authority' to monitor and register websites, YouTube platforms, and media outlets. This move seeks to create a safer online environment.

• Personal Data Protection Bill: The seemingly well-intentioned Personal Data Protection Bill raises concerns about data privacy. It mandates the localization of sensitive personal data within Pakistan's borders. However, with the country's infrastructural limitations, implementing this requirement becomes problematic, impacting both local and international businesses.

Reasons for raised eyebrows: Various stakeholders, from digital rights activists to businesses, fear that the proposed amendments could restrict online speech and they are not alone. The Asia Internet Coalition (AIC), a global association of social media companies, penned a letter to Prime Minister Shehbaz Sharif that these actions might isolate Pakistan internationally and hamper its internet economy growth.

TLDR: Recent legislation nods in Pakistan are a big deal for digital rights and the economy. The changes involve amendments to cybercrime laws, a push for online safety, and data protection. Stakeholders worry these changes could limit online speech. The Asia Internet Coalition (AIC) warns they might isolate Pakistan and hinder its internet economy growth.

Tech tour of news

✶Pakistan's Prime Minister, Shahbaz Sharif, has introduced a new tool called 'Pakistan Code'. This tool enables citizens to easily access federal laws, promoting transparency. 'Pakistan Code' is accessible on its website and through Android Play and Apple Store. The iOS version of the app is currently in Beta.

More interesting Itla (اطلاع) we consumed:

📩 If you’ve graduated from school and feel like your brain is rotting from the mundanity of the corporate grind (not dramatic at all), you might wanna subscribe to Scott Galloway’s newsletter called No Mercy / No Malice. Reading it every Friday feels like it’s food ..for your brain.

🎥 Rarely one would want to rewatch standup comedy because same old jokes, what's the point? Unless, of course, it's Daniel Sloss in the spotlight. His standup comedy Daniel Sloss: Live Shows on Netflix is something that we go back to if we want to laugh and have an existential crisis at the same time.