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Pakistan, Afghanistan and the Pakistani Taliban

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Nine Pakistan army soldiers were killed in attacks carried out by the Pakistani Taliban (TTP) in one of its bases in Zhob garrison in northern Balochistan.

Pakistan’s army said that the militants launched the attack, following which four soldiers were killed and five others were injured. Later, in an update, the army said that five soldiers who got critically injured earlier while “fighting gallantly” had succumbed to their injuries, putting the death toll to nine.

“Security forces and the nation remain resilient and determined to thwart all such dastardly attempts of the enemy aimed at destroying the peace of Balochistan and Pakistan,” the Inter-Services Public Relations (ISPR) said in a statement.

Days after the attack, Pakistan’s Chief of Army Gen. Asim Munir visited the wounded in a hospital in Quetta, and several criticized Afghanistan’s government under the rule of the Taliban for such an attack in Pakistan.

Later, Khawaja Asif, Pakistan’s defense minister took a similar position and blamed Afghanistan for such attacks.

“Irrespective of Afghanistan’s stance, Pakistan stands resolute in uprooting terrorism from its soil, whatever the source. This is regardless of whether or not Kabul has the will to reign in militants from within its borders,” Asif said.

Pakistan blames Taliban for not respecting the neighbors

He blamed the Taliban for not respecting the neighbors, and said that the Pakistani Taliban (TTP) roam freely in Afghanistan.

Asif also criticized the government of Imran Khan, former Prime Minister of Pakistan, who allegedly supported the transfer of TTP from Afghanistan to Pakistan.

The government of Afghanistan is currently under the control of the Taliban.  During nearly three decades of struggle, including political and military engagement, they were accused of being very close to the government of Pakistan.

There is even an accusation of the establishment of Taliban by the Pakistani army and especially its intelligence department.

When the Taliban were defeated in Afghanistan in 2000, they used Pakistan’s soil as a shelter and a training and re-equipment camp.

On the other hand, Tehreek-e-Taliban Pakistan (TTP) considers itself a branch of Afghan Taliban.

The TTP has even pledged allegiance to the current supreme leader of the Taliban, Mullah Hebatullah Akhundzada. Meanwhile, the Afghan Taliban has been accused of giving to the leaders, fighters and families of TTP members in Afghanistan.

TTP is being transformed to Afghanistan by help of Pakistan

But, many say that the Afghani Taliban in coordination with the government of Pakistan and at the expense of Islamabad had transferred the Pakistani Taliban from the south and east to the north and northeast of Afghanistan.

The Afghani Taliban during their war against the US forces had received full support from the TTP.

Therefore, the relationship between the Afghan Taliban and the Pakistani Taliban is bilateral and durable.

But such an apparent relationship depicts a cycle of violence, in which the Pakistani army and government support the Afghan Taliban, the Afghan Taliban support the Pakistani Taliban, and the Pakistani Taliban attack the people and government of Pakistan.

Lack of seriousness against the TTP

The government of Pakistan under the leadership of Shahbaz Sharif is nearing its end. Prime Minister Sharif has recently promised to step down from power at the end of the legal deadline and pave the way for the establishment of the future government.

Therefore, the life of Sharif’s government will end on August 13, and within 60 days after that, the elections of this country must be held, where a new government will be formed as a result.

Indeed, this election is more sensitive than other elections. One of the reasons for its sensitivity is the conflict between the Tehreek-e-Insaf party, led by Imran Khan, the ousted Prime Minister of Pakistan, with the army and the current government.

The current government, which is led by the Nawaz branch of the Muslim League, has powerful parties such as the People’s Party led by Bilawal Bhutto Zardari and the Jamaat Ulema Islam led by Maulana Fazal Rehman in a fragile coalition.

This coalition was not formed based on the closeness of the political beliefs of these parties – the main reason for its formation is having a common enemy named Tehreek-e-Insaf. Otherwise, the People’s Party, which claims to fight for the secularization of Pakistan, and the Jamaat Ulema-e-Islam Party, which is at the opposite end of this claim, cannot be combined.

TTP issue is part of electoral propaganda

Now, despite the fact that Imran Khan is under severe pressure from the army and the current government, and even he was forced to resign from this party and some of his members also forced to withdraw from politics, Imran Khan is still popular among the masses of Pakistan. It can be the main rival of the parties included in the current coalition government.

There are speculations that the army and the current government of Pakistan are trying to find a way to exclude Tehreek-e-Insaf from participating in the upcoming elections, but they do not succeed, there is a possibility that Tehreek-e-Insaf will come to power again.

Therefore, this election is of special importance for people like Khawaja Mohammad Asif, who became a member of the parliament to the Ministry of Defense, and General Asim Munir, who currently leads the Pakistan Army as a potential enemy of Tehreek-e-Insaf.

Imran Khan will win again

If Imran Khan and his political team can take power once again, the fight against the unlimited powers of the army, its interference in civil affairs, and especially the generals who, according to him, plotted against Tehreek-e-Insaf and then filed a case against its leaders– is not far from possible.

Khan tried to fight against the army during his rule but failed. However, if he wins again, his fight with generals like Asim Munir is very likely.

Therefore, what Khawaja Asif and Gen. Munir have said in recent days, after the TTP attack on the Zhob military center, can have a propaganda aspect and be a part of the unofficial and premature election campaign.

The previously mentioned cycle of violence continues to take victims from the people of Afghanistan and Pakistan. This cycle of violence is carried out in Afghanistan by different militant groups, inducing the Islamic State (IS), and in Pakistan by TTP. Now, on the eve of Pakistan’s decisive elections, the wounded people of this country are angry and saddened by the attacks of fundamentalist groups.

The public opinion in such a situation demands that the army and the government of Pakistan take steps to fight terrorism. Since the origin of terrorist groups ends in Rawalpindi, the words of Pakistani government officials and the head of the army of this country do not seem very serious.

Pakistan must stop blaming Afghanistan for its own failure

If they are honest and serious in their fight against terrorism, they will stop blaming the Afghan government for harboring TTP instead focus on its solution which has two options – 1, the start negotiations and second to carry out comprehensive military operations.

Taliban spokesman, Zabihullah Mujahid has said that there is no TTP in Afghanistan and asked Pakistan to share any evidence in regards if there is any.

“In case we receive evidence, we will consider it and take action. Pakistan blames us for its own failure in maintaining the law and order situation internally,” Mujahid said.

In a major move, the Ministry of Defense of Pakistan and the army have guided the Afghan Taliban to the “Doha” agreement and the international commitments of this group and asked them to adhere to these commitments and prevent the use of Afghan soil for terrorist acts against other countries.

Again Mujahid said that Doha agreement was signed between Taliban and US and refuted Pakistan’s role in the peace agreement.

Pakistan’s role in Doha peace agreement

However, Asif said that in reality, Pakistan played a pivotal role in facilitating the Doha Peace Agreement. “The constructive contribution of Pakistan in enabling the peace agreement between the United States and the Afghan Taliban on February 29 received commendation from various notable figures, including former Afghan President Ashraf Ghani, US Secretary of State Mike Pompeo, Qatari Foreign Minister, and Taliban leaders, among others,” Asif added.

However, if the government and army of Pakistan really consider TTP as an enemy, they will not be able to fight this group by moving them from one place to another. They have sufficient access to the territory of Pakistan through one and other ways.

The best way to fight the TTP is that the government of Pakistan should take the issue seriously and start the fight with their terrorist policies and in the second step takes practical action against terrorist religious schools in Pakistan.

ASIA

How will Trump’s potential tariffs affect Southeast Asia?

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Southeast Asia is worried about Donald Trump’s threat of universal tariffs and a new trade war with China. Five of the region’s six largest economies run a trade surplus with the United States.

But experts say the situation may not be so bad. The region, which tries to remain geopolitically neutral, saw an increase in gross trade with both China and the U.S. between 2017 and 2020 during Trump’s first presidency. Vietnam, Indonesia, Malaysia, and Thailand have benefited as companies from China, Japan, South Korea, Taiwan, and the U.S. have expanded their production bases in Southeast Asia to avoid U.S. tariffs.

Experts say exports and economic growth will take a hit in the short term, but the region could benefit from trade diversion and substitution.

What is Trump’s tariff threat?

The goal of Trump’s trade policy is to bring manufacturing jobs back to the U.S. and decouple supply chains from China. Trump and his advisers claim that China’s trade advantage is due to “currency manipulation, intellectual property theft and forced technology transfer”.

During his first term, Trump used executive powers to impose tariffs of up to 25% on $250bn of electronics, machinery and consumer goods imported from China. Beijing retaliated with similar measures on U.S. agricultural, automotive and technology exports.

Now Trump has proposed a 60 per cent tariff on all Chinese goods entering the U.S. and tariffs of up to 20 per cent on imports from everywhere else.

How bad could it be for Southeast Asia?

According to Oxford Economics, about 40 per cent of Cambodia’s exports go to the U.S., making it the largest exporter in Asean as a percentage of total exports, followed by Vietnam with 27.4 per cent and Thailand with 17 per cent. Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said the Thai economy could take a 160.5 billion baht ($4.6 billion) hit if Trump fulfils his promises.

Vietnam has the world’s fourth-largest trade surplus with the United States. This imbalance has been growing rapidly as Chinese, Taiwanese and South Korean companies have used Vietnam to avoid Trump-era tariffs. Vietnam’s fortunes could change just as quickly, especially if the U.S. continues to classify Vietnam as a ‘non-market economy’, which requires higher tariffs.

Uncertainty over Trump’s tariffs could cause companies to pause or halt investment plans in Southeast Asia. U.S. companies accounted for about half of Singapore’s $9.5 billion in fixed-asset investment last year, according to the city-state’s Economic Development Board. In his congratulatory letter to Trump, Prime Minister Lawrence Wong was quick to remind him that the United States enjoys a “consistent trade surplus” with Singapore.

Any blow to the Chinese economy will have repercussions for Asean countries that depend on Chinese consumption, export demand and tourism. A reduced appetite for Chinese goods will also affect Southeast Asian suppliers of inputs to Chinese producers. Indonesia, Southeast Asia’s largest economy, will suffer the most because it exports 24.2 per cent of its goods to China, mainly commodities.

Unable to send their goods to the U.S., Chinese exporters may turn to Southeast Asia, where governments have faced complaints from local producers hurt by dumping in metals, textiles, and consumer goods.

What is Southeast Asia’s advantage?

Southeast Asia’s current manufacturing boom started because of the trade war. Over time, analysts expect trade substitution and diversion to outweigh the hit to growth.

“We think a stronger crackdown on China could lead to more supply chain diversion as Chinese companies trade and invest more in Asia,” said Jayden Vantarakis, head of ASEAN research at Macquarie Capital.

“Electric vehicle factories, which some Southeast Asian governments are aggressively pursuing, could provide an economic buffer. Demand for EVs is also growing outside the U.S., so I think there could be a net benefit for Indonesia. Smaller countries that are trying to be carbon neutral, especially as petrol prices get more expensive, will try to take over the supply and buy more electric cars,” said Sumit Agarwal, a professor at the National University of Singapore’s School of Business.

Trump’s promised tariffs could embolden Asean governments to impose anti-dumping duties on Chinese goods, as Thailand did on rolled steel this year. Stricter U.S. rules of origin could also give governments an opportunity to ensure that more high-value parts are produced and assembled locally.

How will Southeast Asian currencies and markets be affected?

Trump’s tariffs could reduce pressure on Southeast Asian central banks to ease monetary policy further.

“Essentially, Trump’s victory is inflationary for the world because of his planned tariffs, so the global monetary normalization or easing cycle will probably not be as sharp as previously thought, including in the Philippines,” said Miguel Chanco, chief emerging Asia economist at UK-based Pantheon Macroeconomics.

Speaking to Nikkei Asia, Chanco said Southeast Asian currencies will not strengthen as much as previously expected, partly because markets are re-pricing the pace of easing by the U.S. Federal Reserve and thus the dollar will continue to strengthen.

Among Southeast Asia’s six major economies, the Thai baht and Malaysian ringgit have been the worst-performing currencies since Trump’s victory, losing 3.2 per cent and 2.9 per cent respectively against the U.S. dollar through Wednesday.

Thai brokerage InnovestX recommended stocks that would benefit from a strong dollar and weak baht. These include companies with significant export earnings, such as CP Foods and Delta Electronics, or tourism-related companies such as Airports of Thailand, property developers and hoteliers.

Governments are already taking steps to reduce their over-dependence on the U.S. or China by deepening ties with other countries and regions and emphasizing their neutrality.

Southeast Asian economies in particular are also expected to focus on building resilience by strengthening intra-ASEAN trade.

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Japan’s exports rise despite global risks, boosted by China

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Japan’s exports rose more than expected in October, driven by strong demand from China and other parts of Asia, despite growing uncertainties in global markets.

Exports increased by 3.1% year-on-year, led by significant growth in shipments of chip-making equipment, particularly to China, according to the Finance Ministry’s report on Wednesday. This marked a rebound following the first drop in 10 months in September. October’s figures exceeded economists’ forecasts of a 1% rise and were also bolstered by increased shipments of medical products to the United States.

Meanwhile, imports edged up by 0.4%, defying expectations of a 1.9% decline. As a result, the trade deficit widened to 461.2 billion yen ($2.98 billion), compared to 294.1 billion yen in the previous month.

This stronger-than-expected export performance has raised optimism about Japan’s economic recovery. Although the country’s gross domestic product (GDP) expanded for the second consecutive quarter through September, the pace of growth has been tempered by the drag from net exports.

“Today’s data raises hopes that external demand will revive in the October-December quarter,” said Hiroshi Miyazaki, Senior Research Fellow at the Itochu Research Institute. “The Chinese government’s stimulus measures have stabilized its economy and reversed the prior decline.”

Exports to China rose by 1.5% last month, rebounding from a 7.3% drop in September, with semiconductor manufacturing equipment exports surging by nearly a third. These gains align with signs that China’s stimulus policies are beginning to yield results, driving growth in certain sectors and boosting consumer spending.

Notably, Japanese exports grew despite the yen’s strengthening against the dollar, averaging 145.87 yen per dollar in October—2% stronger than the previous year, according to ministry data.

The export rebound occurs against a backdrop of heightened concerns about global trade policies. Business leaders are bracing for the potential return of Donald Trump to the White House, with fears that his proposed tariffs—60% on imports from China and 20% on other nations—could disrupt international commerce.

Some regions are already experiencing a slowdown. Shipments to the United States and Europe declined by 6.2% and 11.3%, respectively, in October.

The Bank of Japan (BoJ) is closely monitoring these developments. BoJ Governor Kazuo Ueda noted on Monday that while the Federal Reserve’s prospects for a soft landing have improved, risks tied to the U.S. economy and their impact on global markets require careful consideration.

The most pressing concern for Japan’s trade outlook is the impact of potential U.S. tariffs. Historical data from the U.S.-China trade war (2018-2019) suggests that a 1% increase in export prices, including tariffs, led to a 0.35 percentage-point reduction in profit margins for Chinese exporters, according to research from Stanford University’s Centre for Chinese Economics and Institutions. A similar scenario could hurt Japanese firms’ profitability, counteracting gains from the yen’s depreciation.

“We are not yet at a stage where Trump’s tariff policy is clearly impacting export volumes or exporters’ behavior,” Miyazaki told The Japan Times. “However, there remains significant uncertainty, and we must continue to monitor the policy stance of the next Trump administration,” he added.

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IMF reviews Pakistan’s $7bn bailout

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An International Monetary Fund (IMF) team conducted an unscheduled visit to Pakistan last week to assess the country’s progress on the terms of its $7 billion bailout package. The surprise visit, coming less than two months after the loan’s approval, has raised questions about the future of the bailout program. IMF staff are expected to present their findings to the Washington-based executive board for review.

What prompted the IMF’s unexpected visit to Pakistan?

Several officials, speaking to Nikkei Asia on condition of anonymity, highlighted key factors prompting the visit. These included a $685 million shortfall in the government’s tax collection target for the first quarter of the current fiscal year and a $2.5 billion deficit in the external financing required under the bailout terms. Compounding these issues was the failed sale of Pakistan International Airlines (PIA), a key component of the IMF-recommended privatisation drive.

While routine IMF program review visits are standard, the timing of this visit—just seven weeks after board approval—has raised concerns. “This suggests significant difficulties in implementing the program,” said Naafey Sardar, an economics professor at St. Olaf College in the United States, speaking to Nikkei Asia.

Ikram ul Haq, a lawyer specializing in economic and tax policy, added, “The reality is that the government’s promises to the IMF have not been fulfilled.”

What were the key issues discussed?

The IMF raised the issue of the tax gap and urged action to ensure that Pakistan meets its annual tax collection target of $46 billion.

Islamabad was also asked to engage with Saudi Arabia and China, the largest investor, to bridge the external financing gap. Promised energy sector reforms and the repayment of billions of dollars of debt owed to mostly Chinese-backed power plants in Pakistan were also discussed.

Another issue was for the IMF to press provincial governments for more funds, such as the Benazir Income Support Programme, which provides a $2.1 billion annual cash transfer for poverty alleviation, currently paid for by the central government.

How does agricultural income tax fit into this picture?

As part of the loan agreement, Pakistan’s provinces missed an end-October deadline to harmonize their agricultural income tax laws with the federal income tax.

The IMF had previously said that Pakistan’s loan agreement would be in jeopardy if agricultural income remained largely untaxed. During the meetings, provincial government officials told the IMF that they would face significant difficulties in implementing a higher tax.

Economist Aqdas Afzal said such a move would face significant opposition from big landowners, who are disproportionately represented in the federal and provincial assemblies.

“Given the weak mandate of the current government, a higher agricultural income tax is unlikely as it could trigger major social and political unrest,” he added.

What assurances has the government given to the IMF?

Pakistan has assured the IMF that it will increase the provincial agricultural income tax rate by up to 45 percent. It has also pledged to meet annual tax collection targets and to continue reforms in the energy sector and state-owned enterprises.

“This is an ongoing dialogue process and there have been discussions [with the IMF] on energy and SOE reforms, the privatization agenda and public finance,” Pakistan’s Finance and Revenue Minister Muhammad Aurangzeb told local media.

Haq, a tax expert, said the government’s primary focus would be on meeting the six-month revenue collection target set by Pakistan’s Federal Board of Revenue, a government agency that regulates and collects taxes.

What are the challenges ahead for Pakistan’s loan agreement?

Meeting tough tax targets and implementing structural reforms are major hurdles for the government to overcome.

The IMF has previously cancelled other loan programmes when conditions were not met. Payments to Pakistan could be suspended or stopped altogether, which would be a serious blow to a country struggling with a sputtering economy.

The IMF is pressing for cuts in government spending.

“Structural reforms are being resisted by vested interests, making efforts to meet IMF conditions even more difficult,” Haq said.

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