Human development has been constrained by either the resources or effective utilisation of resources. With the passage of time, developments and discoveries have only proven that the world where we live and prosper has never been out of resources. Only we were unable to understand the resources and lacked the knowledge as to how to utilise them effectively and efficiently.
We have also seen in the past that we have been consuming resources and spending them mostly on fulfilling our desires instead of the needs. Had there been the equation otherwise the world would have been much better today. The resources were taken into concentration instead of socialising them. Monopolies were created and then global blackmailing in the form of preferential trade rights came into practice.
Wars and conflicts were staged and nations were put into chaos only to capture the resources. From the era of the past where human beings were the "Commodities" which were captured mostly to be utilised in agriculture, mining and trade, to the capturing of natural resources. Everything is available in the pages of the history of the world wherever you may like to find.
Then the era of modern age started where awareness and consciousness became better, then the norms of the exploitation were also changed. It took different form. From the theory of competitive advantage to owning the very resources of any person, nation or state through trade and investment. Exploiters found different mechanisms.
The era we live in today has some other dynamics which control the world through different mechanisms, these include:
-- Economics
-- Finance
-- Trade
-- Investment
-- Geopolitics
-- Communication and media
Each and every mechanism was used to exploit the poor. Now let us see what our immediate history tells us: East India Companies In the year 1600, The British East India Company was founded with the Royal Charter. It was not the only East India Company that was founded to trade with the Eastern part of the world there were some other companies too:
-- 1600: British East India Company
-- 1602: Dutch East India Company
-- 1616: Danish East India Company
-- 1628: Portuguese East India Company
-- 1664: French East India Company
-- 1731: Swedish East India Company
What was the effect of these companies on the subcontinent India: From the History of subcontinent India-1
-- 1600: British East India Company (No direct shareholding of the British Crown, only indirect control)
-- 1613-14: British East India Company sets up trading post at Surat.
-- 1615-18: Mughals grant Britain right to trade and establish factories in exchange for English navy's protection of the Mughal Empire from the Portuguese sea power.
-- 1764: British defeat the weak Mughal Emperor to become rulers of Bengal, richest province of India.
-- 1773: British East India Company obtains monopoly on the production and sale of opium in Bengal.
-- 1792: Britain's Cornwallis defeats Tipu Sultan of Mysore and most powerful ruler in South India, main bulwark of resistance to British expansion in India.
-- 1799: Sultan Tipu is killed in battle of Srirangapattinam.
-- 1809: British strike a bargain with Ranjit Singh for exclusive areas of influence.
-- 1843: British conquer the Sindh region (present-day Pakistan).
Now let us look what they were doing in some other parts of the world: China
From the history of China
-- 1685: Kangxi became the first emperor to open limited trading with foreigners, which started with the Canton territory. He also imposed strict terms for trades such as requiring foreign traders to live in restricted areas, staying only for the trading seasons, banning firearms, and trading with silver only.
-- 1699: The British East India Company made the first sea venture to China in 1699, and the region's trade with British merchants developed rapidly soon after.
-- 1711: The company established its first trading post in Canton.
-- By 1773: The British reached a landmark 1,000 chests of opium in Canton with China
-- By 1799: Reached the consumption of 2,000 chests annually.
-- 1839: The refusal by Qing Dynasty authorities to import opium resulted in the First Opium War between China and Britain during 1839-1842.
-- 1841: Hong Kong Island was occupied by British forces on 20th January 1841.
-- 1842: On 29th August 1842 the island was formally ceded in perpetuity to the United Kingdom under the Treaty of Nanking. The British established a crown colony with the founding of Victoria City the following year.
-- 1856-60: The Second Opium War happened during 1856 and 1860. China was defeated again.
-- 1898: The "Convention for the Extension of Hong Kong Territory also known as Second Convention of Beijing on July 1, 1898, which also includes New Kowloon, granting a 99 year Lease to Britain which was to end on June 30, 1997.
Hong Kong after British occupation Hong Kong became the "hub" of all illegal businesses globally and a "black market" for many "products". These included:
-- Drugs
-- Weapons
-- Money laundering
-- Smuggling of prohibited goods
The coincidence
-- 1773: British East India Company obtains monopoly on the production and sale of opium in Bengal
-- By 1773: The British reached a landmark 1,000 chests of opium in Canton with China
-- By 1799: Reached the consumption of 2,000 chests annually
It means that East India Company was producing opium in Bengal and selling that in China. And do you remember what the most famous product of Afghanistan is? It is the opium. Now you can very well understand what they are doing in Afghanistan.
From the history of subcontinent India-2 The subcontinent India remained in the rule of East India Company until the First Indian Revolution of 1857 (Sepoy Mutiny of 1857 for the British).
-- 1857: The Crown took over the British East India Company and its three Armies.
-- 1876: British Queen Victoria (1819-1901), head of Church of England, is proclaimed Empress of India (1876-1901).
-- 1895: The three Armies were merged into United India Army.
-- 1906: Muslim League political party is formed in India.
-- 1939: Mohammad Ali Jinnah calls for a separate Muslim state.
-- 1940: The Pakistan Resolution.
-- 1947: The creation of Pakistan.
The Hong Kong handover
-- 1984: On December 19, 1984 a declaration was signed by People's Republic of China and the Kingdom of Britain. The declaration stated that China had decided to resume the exercise of sovereignty over Hong Kong (including Hong Kong Islands, Kowloon, and the New Territories) with effect from 1 July 1997 and the United Kingdom Government declared that it would restore Hong Kong to the People's Republic of China with effect from 1 July 1997.
-- 1997: Hong Kong was handed over to China.
Lessons from the history From the above account of the history of the subcontinent India and China we come to conclusion that all that happened in these two major parts of the world started with two small steps or you may call Foreign Direct Investment for trading by British East India Company:
1. Setting up of a post at Surat in 1613-14 and
2. Setting up of a trading post in Canton in 1711.
Foreign direct investment We can now easily understand what the three different prevalent modes of Foreign Direct Investments can do for us.
-- Horizontal FDI
-- Vertical FDI
-- Platform FDI
Horizontal FDI This type of investment is used when the investor sets up investment in such a way to sell his products in the host country:
a. the products manufactured by him in any other country, or
b. by manufacturing products using raw materials produced in any other countries. Transfer pricing/shadow pricing techniques are utilised to maximise profits in his country and show little profit in the host country.
We find most of the multinationals working in the subcontinent especially Pakistan doing this practice. In the short term it appears to be:
a. expanding industrial or commercial base
b. contributing to the exchequer
c. providing employment
d. promoting corporate culture, etc.
But in the medium and long run they are taking the money out of the Economy of the host country.
VERTICAL FDI This type of foreign investment is partly good and partly very bad. As this is focused to perform part of value-adding activities in a host country. This implies that part of the goods will be manufactured in some other countries with raw materials produced in the same or any other countries and performing only some of the value adding activities in the host countries.
If the value added products are exported to some other countries then it would contribute positively and if the value added products are sold in the local market than it is no different from the Horizontal FDI.
PLATFORM FDI This type of foreign investment is good for the country as the country is used only as a platform to re-export. The products are manufactured somewhere else and exported to some other countries. This type of investment provides some benefits like:
a. payment for utilisation of infrastructure
b. providing employment
c. contributing to the exchequer to some extent
d. creating commercial activities
Singapore and Dubai are good examples in our region.
WHERE DO WE STAND IN FDI? The position of Pakistan in terms of Foreign Direct Investment amongst the SAARC countries in terms of value shown in table 1:
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Table 1
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The SAARC Countries By Value
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US $ (Mil)
Serial Country Name 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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1 Afghanistan 0.68 50.00 57.80 186.90 271.00 238.00 188.69 87.28 213.67 75.65 83.41
2 Bangladesh 78.53 52.34 268.29 448.91 813.32 697.21 652.82 1,009.62 732.81 918.17 1,137.92
3 Bhutan - - 2.53 3.46 9.10 6.12 73.81 3.10 6.54 18.99 16.40
4 India 5,471.95 5,626.04 4,322.75 5,771.30 7,269.41 20,029.12 25,227.74 43,406.28 35,581.37 26,502.00 32,190.00
5 Maldives 20.54 24.72 31.77 52.93 52.99 63.83 125.56 175.02 153.96 216.47 281.57
6 Nepal 20.85 (5.95) 14.78 (0.42) 2.45 (6.65) 5.74 1.00 38.18 87.80 94.02
7 Pakistan 383.00 823.00 534.00 1,118.00 2,201.00 4,273.00 5,590.00 5,438.00 2,338.00 2,018.00 1,308.77
8 Sri Lanka 171.79 196.50 228.72 232.80 272.40 479.70 603.00 752.20 404.00 477.56 955.92
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And the ranking of SAARC Countries globally shown in Table-2:
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Table 2
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The SAARC Countries Global Ranking
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Serial Country Name 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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1 Afghanistan 167 133 138 114 109 126 143 161 122 160 163
2 Bangladesh 113 130 95 86 82 90 112 99 93 85 85
3 Bhutan 176 182 176 176 172 180 165 187 174 176 180
4 India 25 22 26 24 34 21 25 14 11 16 14
5 Maldives 139 147 148 148 149 155 152 143 126 129 135
6 Nepal 138 208 162 203 179 206 187 191 162 158 161
7 Pakistan 72 58 76 57 59 50 51 50 60 57 82
8 Sri Lanka 87 96 98 110 108 101 116 111 110 111 99
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