Tag: Pakistan

Pakistan Economy 2013: Perspectives from Denmark

bakhtawariOne method of scrutinizing a country’s economy is how it is viewed by other nations.  When taking stock at the Pakistan economy 2013, the same rule applies.  Currently, Denmark actually wants to help the Pakistan economy since it will be able to benefit from any developments the Pakistan economy encounters too. Indeed, according to Denmark’s Ambassador, Jesper Moller Sorensen, officials in Denmark see tremendous “economic potential” in Pakistan.  Advancing its trade and economic relations is one way forward.

Sorensen recently discussed the matter with the business community. In his address to the Islamabad Chamber of Commerce and Industry (ICCI), Sorensen pointed out that he had developed a connection with the business community in an attempt to advance current trade between Denmark and Pakistan. Denmark has a lot to offer vis-à-vis wind energy and understands how much Pakistan needs energy for its industry and economy.  Thus Sorensen believes Denmark will be investing in Pakistan’s energy sector in the future, with many energy companies seeking to establish relationships with their Pakistani counterparts to reduce its energy problems.  Companies in Denmark have a lot to offer Pakistan, particularly in this area as well as: food processing; clean technology; health; education and others.

The ICCI’s President, Zafar Bakhtawari spoke along similar lines in his introductory address to the conference.  He said since Denmark is a wind energy leader and Pakistan requires sustainable energy, the former country can be of great help.  He advised private sectors in both regions to “develop close contacts to explore new avenues of improving trade relations.”  There is a similar situation vis-à-vis the strength of pharmaceutical companies in Denmark.

But the question is, what would Denmark get out of all of this potential collaboration between the two regions?  While it seems like a lot of help would be on the way for the Pakistan economy 2013, how can Denmark benefit?  Pakistan does boast high quality and cheap manpower and a very large consumers market.  With Denmark’s advanced technology in the areas discussed above, both countries should seek to develop closer collaboration in trade. Further, with Denmark aiding Pakistan, this would open the door for it to accessing exports in the South Asian region.

At the conference, Sorensen said that his government had given him permission to open a Commercial Section in Denmark Embassy for promoting trade and commercial relations between Denmark and Pakistan.

This news is most welcome given that the matter was discussed four months ago in Karachi.  Denmark’s Pakistan Ambassador, Ole E. Moesby, said that while relations between the two countries were “stable” and had “improved,” still greater work could be done.  And that is what is being encouraged today.

Denmark also needs to be aware however, that it is not Pakistan’s only source of power vis-à-vis its somewhat weak power supply.  The nation gets a lot of help from China too, being one of its largest business partners with 120+ Chinese companies conducting business there. During Nawaz Sharif’s visit to China, an economic agreement was signed between the two countries giving Pakistan foreign investment.  In 2012, the value of bilateral trade between China and Pakistan was $12bn and leaders of both countries have pledged to increase this figure in the future.

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Pakistan Textile Industry

When comparing it to neighboring China, India and Bangladesh, Pakistan’s textile industry has not been faring well. Although Pakistan’s textile exports did witness an increase during 2004-05 and 2010-11, for the same time frame, Bangladesh encountered it at four times the escalation.  As well, while there was an increase in clothing exports and textiles from India from $13.5bn to $23.31bn, Pakistan’s exports increased from $8.82bn to $13.80bn.  In addition, it seems Pakistan has only encountered this lack of growth in recent years. 

Ashan Bashir, the chairman of All Pakistan Textile Mills Association, pointed out that six years ago Pakistan’s textile export industry was significantly higher than that of Bangladesh.  Today, it is substantially higher than that of Pakistan, by $7bn.  As well, between 2004 and 2005, experts in the industry viewed Pakistan as the most lucrative venue for textile investment.  But now, a mere six years later, it looks like that perspective has been completely obliterated.

Thus it is time for politics to take a stand in the textile industry.  Should policy makers review their work on what has happened to the country’s textile industry, they might find the real reasons as to why Pakistan has failed to reach its potential.  If Bangladesh, China and India have been thriving so greatly, why hasn’t Pakistan?  There is a chance that planners have not been longsighted enough and that entrepreneurs have simply failed in their tasks. 

Textile and Cotton

It should also be noted however, that Pakistan did encounter shortages of raw material such as cotton and polyester during the time their exports failed to escalate as they should have done.  However, when looking at those figures, it seems that that might be a myth.  A staggering $425 million from cotton exports was earned by Pakistan during the 2011-12 fiscal year, while, simultaneously, $320 million was spent on its import.  Indeed, approximately a staggering $320m worth of cotton bales were imported, showing an increase of cotton traders to $105m to the national exchequer throughout the most recent fiscal year.

This is quite impressive, especially given the fact that there were substantial rains throughout Punjab and Sindh.  Still, cotton production remains at a high, at close to 15 million bales and this figure was even with the floods claiming over 2 million bales, with close to three-quarters of cotton crops in Sindh being destroyed.

So ultimately, even with the lack of increase in Pakistan’s textile industry in recent years as compared to other neighboring countries, the obstacles the region has combated vis-à-vis cotton is indicating that it is still in the running for competitive exports in the industry.

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US Support of Pakistan

Richard Hoagland, America’s Deputy Chief of Mission ambassador, was most impressed on his recent visit to the Competition Commission of Pakistan (CCP).  While he was there, he commented on the work the CCP has been engaged in vis-à-vis fair business competition; consumer rights and economic reforms. In addition, he toured the premises with Rahat Hassan (CCP Chairperson), meeting with the rest of the team. 

Much of the work of the CCP is focused on ending any existing corruption including: market dominance abuse; collusive practice; untruthful marketing and mergers and acquisitions that have not gone through the proper legitimate channels.  It has achieved this through a variety of different means.  For example, the 2010 Competition Act, has been hugely successful and was really only implemented due to the dedication and focus of the CCP. Ultimately, Hoagland announced that he was “inspired” at what he saw – young Pakistanis making a real difference in the country. 

Vis-à-vis Punjab, the CCP recently issued a policy note, requesting its government to lift the sugar mill growth ban, which would permit new entrants.  The ban was enacted in 2006 and it ended the construction of new sugar mills, as well as the expansion of current ones.  The CCP noted that such a restriction could result in lowered production, price-fixing and quota allocation.

Potential Foreign Investments

Thanks to the CCP, he added, Pakistan is becoming a far more attractive investment option for foreigners which will ultimately result in a more solid economy in Pakistan.  In addition, the US embassy has always backed the CCP and will continue in this venture, thanks to the great work it has been doing, especially as, according to Hoagland, it is the “future of the globally competitive Pakistan.”

In addition, the CCP is becoming known as an attentive government authority, and, along with affirmative media exposure, the private sector is now much more aware of the distinction of competition law.  It is necessary that the law enforcement agency is fair, and can work without hesitation brought on by fear.

So ultimately, Pakistan is working hard and the CCP is navigating and facilitating much of its progress.

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Pakistani Potentials: To Invest or Not To Invest?

 

Global business news items are constantly filled with the doom and gloom of investing in Pakistan.  We therefore thought now would be as good a time as any to investigate just how true this is, or, if perhaps there has been some exaggeration in the perils of Pakistani businesses.

If you ask the country’s Foreign Minister, Hina Rabbani Khar, she’ll tell you that the country has a lot to offer potential investors abroad, but there again she’s probably just a little bit biased in favor of her country.  Chairing a business roundtable in the country with Alistair Burt, the England’s Minister of State for Foreign & Commonwealth Office, she explained about her government incentives for companies, pointing out how Pakistan is always looking to make things easier – and more attractive – for foreign investors.  She also pointed out the needs of the country vis-à-vis creating more business opportunities, especially in the field of energy.  Despite the country’s pitfalls however, Burt did comment that he found British businessmen making significant profits when bringing their businesses to Pakistan and indeed many more are set to start working there in the near future, given this environment.

Pakistan’s Problems

Talking of environment, even though the country hasn’t exactly got the best track record for natural disasters (like the high level flooding it encountered in 2010-11), terrorism, political crises and economic instability, it seems there is still reason to look to invest there.  But let’s look at the stats. Let’s look at the good news: between 2001-7, there was a 10 percent reduction in poverty levels, but an increase in unemployment in 2008-9.

Nonetheless, this still doesn’t have to discourage British investors.  Clearly, the political relationship between Pakistan and the UK are in a good place.  For example, as noted by Tweeter glenoglazaSky, Pakistan's Foreign Minister, meeting William Hague, expressed his gratitude to the UK for giving "650 pounds sterling" to the country’s education aid, although the Tweeter did note that she probably meant 650 million pounds sterling!  So if Pakistan likes the Brits, it could be a pleasant place for them to take their businesses.

Global Pakistani Business: Pros and Cons

In the middle of last year, Helen Coster of Forbes took a trip to Pakistan, meeting with members of the Lahore chapter of The Indus Entrepreneurs, an entrepreneurs networking group.  She discussed the pros and cons of conducting business in the world’s sixth most highly populated country. There are problems for sure: legalities don’t seem to be implemented – there is somewhat of a free-for-all-anything-goes mentality which certainly doesn’t bode well for foreign investors unfamiliar at best with the workings of the country.  It seems there is a large gap in knowledge on who will be there cracking the whip when a contract is broken or business ideas stolen.  Further, it’s not easy finding quality workers since many choose to go abroad for jobs. As well, getting a commercial loan is virtually impossible and all this culminates in huge frustration.

Moreover, if you’re Indian, don’t even think about trying to strike it rich in Pakistan. The Reserve Bank of India has forbidden Indian nationals from investing in Pakistan's manufacturing sector.  It seems to have made no difference that New Delhi is sticking by its claim that no Pakistan-specific Non-Tariff Barriers (NTBs) have been imposed. It seems a bit bizarre, especially given the fact that those in India are not restricted vis-à-vis making investments in any other part of the world.

Pro-Pakistani Profits

So what other hope remains for those seeking to invest in Pakistan?  There are some great stories actually.  One just has to take a look at what Concentrated Solar Thermal Power has achieved.   Head of the company Samir Hoodbhoy initiated and successfully directed the creation of the Central Design Bureau of Pakistan Steel Mills in 1988-92. It wasn’t easy back then, but over the last two decades-plus, he has been able to establish the groundwork for three leading educational institutions in the field of ICT and been on the Board of Advisors of several other civic and educational organizations.  In the field of wind power and solar energy, Concentrated Solar Thermal Power technology has been hugely successful, providing an alternative to Photovoltaic cells; boasting conversion efficiencies of 30 per cent.  And that’s all in Pakistan – the region we seem to be led to believe is not the place to invest in without a whole lot of trouble and strife.

In conclusion, it seems that yes indeed, there are challenges in Pakistan; no-one can deny that, but as the Chinese symbol of “challenge” states “challenge is the same as opportunity.”  Clearly as we have seen, there are plenty of business opportunities in Pakistan as well.

 

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