PAKISTAN’S ECONOMIC PROSPECTS
As global economic gravity shifts to the Pakistan region, immense opportunities are emerging for investors & business entrepreneurs. Pakistan High Commissioner Mohammad Nafees Zakaria provides a snapshot assessment including facts from economic institutions around the globe
Prime Minister Imran Khan’s government has placed strengthening Pakistan’s economy as the highest priority. To that end, thegovernment has undertaken transformational economic and infrastructural reforms to facilitate investors and ensure ease of doing business. The Prime Minister is leading these reforms.
Certain measures are in place that have started to pay dividends. These include the following: guidance for potential investors and business entrepreneurs; clear identification of prospective sectors for investment and businesses; transforming the Board of Investment (BoI) into a virtual ‘one window’ operation to facilitate investors; establishing a Project Management Unit for Industrial Cooperation under the China PakistanEconomic Corridor (CPEC) and an attractive and incentivised investment policy.
In its annual report, The World Bank ranked Pakistan among the ‘most improved economies’ in ‘Ease of Doing Business,’ elevating its position by 28 places from the year before.
Moody’s Investors Service (Moody’s) affirmed Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3, and changed the outlook to ‘stable,’ an improvement from the previous rating of ‘negative.’
According to Bloomberg, the Pakistan Stock Exchange outperformed stock markets in Germany, Sweden, Russia and Irelandby a considerable margin over the last three months in 2019.
In January 2020, JP Morgan, in its ‘Emerging Market Research on Pakistan’ report, strongly recommended investors buy Pakistan’s treasury bonds, being the most lucrative in terms of returns.
In its first review of Pakistan’s economic performance, the IMF declared Pakistan’s reforms on track for sustainable growth, stabilising inflation, significant expansion in social safety nets, poverty reduction and narrowing the gender gap.
According to HSBC Global Research’s ‘World in 2030 Report,’ Pakistan is ranked among the top countries that will be the driving force behind global economic growth in the years leading up to 2030.
Many regional and international ventures like CPEC (with an outlay of US$62 billion), TAPI Gas pipeline project, CASA 1000 Power project and Central Asia Regional Economic Cooperation (CAREC), reflect Pakistan’s encouraging economic prospects. Saudi Arabia, UAE, Turkey, Malaysia, Qatar, Bahrain, Germany, Japanand Republic of Koreaare investing in Pakistan. Furthermore, FDI in Pakistan increased by 200 per cent during 2019.
The Region’s Natural Economic Hub & Energy Corridor
Pakistan’s unique geo-strategic and geographic location at the confluence of South Asia, Central Asia, West Asia and Northwest China makes it a natural regional economic hub and energy corridor.
The country offers the shortest land routes between the sea and China’s Xinjiang Province, the landlocked Central Asian States and Afghanistan, and connects the region to the world at large. By road, the distance from Dushanbe to Karachi port is around 2,700km, much shorter than Dushanbe’s distance to other ports in the region. The port of Bandar Abbas is 3,400km, Vladivostok 9,500km and Rostov on the Don 4,200km away. These facts make Pakistan the most economical trade route to and from the Central Asian Republics (CARs).
In its drive to realise the goal of playing an effective role as a regional trade corridor, Pakistan became a member of Central Asia Regional Economic Cooperation (CAREC), a partnership of ten countries. For the British and other foreign businessmen, Pakistan could be a springboard to explore and exploit the Central Asian markets and its untapped and unexploited natural resources.
China Pakistan Economic Corridor (CPEC)
CPEC is a Flagship Project of China’s Belt & Road transcontinental connectivity initiative www.cpec.gov.pk/
China’s Foreign Minister, Mr. Wang Yi said:“If ‘One Belt, One Road’ is like a symphony involving and benefiting every country, then construction of CPEC is the sweet melody of the symphony’s first movement.”
CPEC is a milestone and affords immense economic opportunities, not just for China and Pakistan, but also for the region and beyond. Dubbed a ‘game changer,’ CPEC involves three routes (western, central and eastern) each over 2,400km. A comprehensive development framework and regional connectivity initiative, it spans over 15 years, involving Chinese investments from initially US$46 billion to, now, over US$62 billion in energy projects, infrastructure, the Gwadar Deep-Sea Port, and the industrial sector. It will serve as a platform for regional cooperation and stability. The Early Harvest Projects phase was successfully completed on schedule in December 2018. Through its development phases, CPEC will produce innumerable economic opportunities for a wide variety of sectors that contribute to economy and employment.
Special Economic Zones (SEZs)
The Pakistan government has approved the establishment of 16 SEZs across the country, with the objective of expanding the industrial base for export-oriented manufacturing. Nine of these SEZs are part of CPEC. SEZs are open to investors from other countries, including our traditional friend, the UK. The sectors in which industries in SEZs are likely to be established are auto and allied industries, motorbike assembly, engineering, light engineering, Halal food, cooking oil, ceramics, ice and cold storage, electric appliances, textiles, plastics, agriculture implements, food processing, pharmaceuticals, chemicals, printing and packaging, garments, marble / granite, iron ore processing, fruit processing, steel, mineral processing unit, leather industry and chromite.
Further details of SEZs can be seen in links below:
Pakistan is a market of 220 million consumers with a middle income class of over 80 million people. The country is bestowed with some of the world’s largest reserves of gold, copper, gas, coal and numerous mineral resources ready to be explored and exploited. Pakistan’s government has identified numerous projects in the oil and gas sectors: on-shore and off-shore exploration, establishing oil refineries acquisition of oil tankers, plus constructing oil storage facilities and pipelines.
Pakistan is a land of opportunities for investors in the above identified sectors, plus many other areas. In addition to the areas listed as SEZs for investment, there is enormous potential for investment and business opportunities in telecommunication infrastructure, fisheries, gems and stones, dairy products, livestock for breeding and exporting halal meat, solid waste management, surgical goods and sports goods production and exports, higher education in emerging technologies (AI; block chain; Internet of Things; and Big Data), public health, developing tourism projects, plus the Prime Minister’s Affordable Housing Scheme (of five million houses with one of the most liberal investment policies.)
Agriculture is the mainstay of Pakistan’s economy, contributing 25 per cent to national GDP. Cotton, sugar and rice are the main cash crops. While livestock and poultry have a major share of the agriculture sector, forestry and fisheries have huge potential. Prime Minister Imran Khan’s government is cognizant of the need for increasing national productivity to ensure food security for the growing population as well as to meet existing demand. Envisaging that growth in agri-produce will also benefit the country from agro-based exports, the government welcomes modern technologies in the agriculture sector to increase national productivity. Those interested in investing in the agriculture sector and latest technologies and modern farming systems are welcome.
Breeding animals, fish farming, vertical farming, horticulture and dairy processing, are some of many areas holding immense potential with lucrative returns.
No permission is required from any government agency for investment in Corporate Agricultural Farming in Pakistan. Customs duty on the import of plant, machinery and equipment is zero per cent. 100 per cent equity is allowed with no restriction on remittances of capital, profits and dividends.
READYMADE GARMENTS / TEXTILES
The textile and clothing sector account for more than 55 per cent of national exports, and utilises 40 per cent of the industrial labour force. Pakistan’s textile industry is unique as it is vertically and horizontally integrated, and produces a range of products such as readymade garments, bed sheets, towels, fabric and yarn. Major buyers include Adidas Sourcing Ltd (Germany), Inditex (Spain), C & A Sourcing International, Ltd. (Netherlands), Li and Fung (Hong Kong), H&M (Sweden), GAP International Sourcing (California) Inc. (US), JC Penny (US), Levis Strauss (US), Kirens International (UK), Wal Mart Global Procurement (US), and Target Wünsche (Hong Kong) Ltd. Market access to Pakistan comes under the Free Trade Agreements with China, Malaysia, GSP+ in EU and GSP facilities in the US, Australiaand Japan.
Across the globe, Pakistan is considered a reliable manufacturer of surgical instruments, due to their good quality and reasonable price. Around 300 medium- to large-size companies manufacture a wide variety of medical instruments covering all the kinds of surgery and basic medical services. More than 90 per cent of this is exported across the world. Major export destinations are the US, Germany, UK, France, Belgium, Netherlandsand China. The majority of Pakistani surgical companies are ISO-9002 certified and have secured good manufacturing certification. Adoption of best practices and safety standards has enabled Pakistani manufacturing companies to integrate with the global supply chains.
Sporting goods is one of Pakistan’s main export sectors fetching more than US$400 million of foreign exchange for Pakistan. Pakistan produces a wide variety of sporting goods and supply to Nike, Puma, Adidas, Decathlon, Select, Lotto, Umbro, Mitre, Mikasa, Wilson and Diadora. Major export destinations of Pakistani sports goods are western countries with the US having a 33 per cent share followed by the UK with 17 per cent, Germany 11 per cent and Spain 7 per cent.
Pakistan caters to around 70 per cent of the total world demand of hand stitched inflatable balls, which translates into around 40 million balls annually worth US$ 210 million. Made in Pakistan ‘FIFA Approved’ and ‘FIFA Inspected Soccer balls’ are used in FIFA competitions and other international tournaments. Pakistan produced and supplied ‘Brazuca’ and ‘Telstar 18’ soccer balls in the Brazil 2014 and Russia 2018 FIFA World Cups. Adidas, a FIFA partner since 1970, exported approximately 42 million Brazuca balls from Pakistan. Bat manufacturing companies like CA Sports, Malik Sports and Ihsan Sports have been sourcing their own branded cricketing equipment to the global market, and are being used by renowned international cricket players. Corporate social responsibility and ethical business practices are keenly observed by entrepreneurs in the Pakistani sports industry. Many Pakistani companies have secured ISO 9000, Social Accountability (SA 8000) and Fair-Trade Labeling Organisation Certifications.
PLEASE CONTACT PAKISTAN HIGH COMMISSION IN LONDON WITH ANY QUESTIONS.
COMMERCIAL WING, PAKISTAN HIGH COMMISSION, LONDON,
T: +44 20 7664 9215 T: +44 20 7664 9245
E: COMMERCIALCOUNSELLOR@PHCLONDON.ORG E: S.SHAHZAD@PHCLONDON.ORG
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