It wouldn’t be an exaggeration to say that the country has emerged from a roller coaster ride in the last decade. The nation has witnessed some heart wrenching incidents but has also brought some laurels to compensate for the colossal damage. Multiple factors have contributed to this changed state; improved law and order situation in the metropolitan cities, booming economy, rising middle class and expected upgradation to “emerging markets” by MSCI.
However, the million dollar question which still haunts many private businesses, local investors and other equity dealers is that the flow of foreign investment is not as healthy as it should be with all constituents giving a green signal. Much has to do with human nature which is risk averse predominantly as our past has been extremely unstable on many fronts.
Many equity dealers are currently pitching as hard as they can to attract expats and foreign investors to invest in the country but it still remains a hard gamble for many considering Pakistan’s turbulent history.
Real numbers are positive…
The country’s economy has been bulging at a fastest pace in last 8 years but a larger chunk of this growth is fueled by surge in consumer market and despite much effort by the local government, foreign investment is still lagging.
A local equity dealer while quoting his annoyance stated “Most people have never been to Pakistan. It’s a huge problem.” He further added, “When people visit Pakistan, they see it’s actually opposite of what they expect.” This is one of main reasons that Foreign direct investment (FDI) figure of USD 1 billion is not so impressive during the last nine months. When compared with other mid sized economies like Indonesia where FDI numbers have reached soaring levels of USD 29 billion.
Local business community has also taken a sigh of relief with improving security situation as military operation against anti Pakistan forces has provided massive confidence to local businesses to flourish during the last few years.
Looking at the hard core numbers, the country’s interest rate has been at a lowest level of last four decades. Pakistan’s currency which seemed turbulent in the recent past is showing good signs of stability with foreign exchange reserves reaching their all time high. Lastly, the much talked about China Pakistan Economic Corridor (CPEC) a huge project of USD 46 billion, will also provide strong support to country’s growth trajectory.
With inflation curtailed at a low level of 3%, there has been a sudden surge in consumerism in the economy. From restaurants to shopping centers; the soaring middle class is creating an impetus for growth to many industries. Be it real estate or construction; economic activity is constantly on the rise.
Perceptions versus reality…a huge time lag!
Ironically there is a 180 degree difference in the perceived image of Pakistan versus its current actual picture. This is the reason why many expats before coming to Pakistan ask us whether we can move around freely in our own country or do we have gunmen escorting us where ever we go. Foreign investors also face similar dilemma as they cannot trust the fact that economic stability is here to stay.
With a major crackdown against the militants on the Pak -Afghan border, the benchmark stock market is crowned to be Asia’s best performing index of 2016.
Advisor to Prime Minister, Miftah Ismail, on bringing FDI stated, “Perceptions change with a lag. Our reality has changed, but it takes a little while for investors to realize that.” He also added that they are expecting more money to flow in but it requires persuading investors and convincing them to keep their confidence in the local economy.
A goods news is that many international companies are keeping strong eyes on Pakistan’s bulging consumer market with major investors like Nissan and a dutch diary company pledging an investment of USD 460 million each.
National kitty to gain an investment of USD 500 million
Despite being nominated as the best performing index in Asia, many security investors feel that the leading stock exchange of Pakistan is still offering discounts to foreign investors which is the reason for its colossal growth of 500 percent since early 2009.
FDI of USD 500 million is mainly routed towards the power and engineering sectors as it is imperative to curtail excessive power shortage in the country. The current government is contemplating to end the IMF USD 6.7 billion financial aid in September as they believe the country might be self sufficient by that time.
With the above mentioned affirmative actions and programs it seems that the stability is here for a long time period. Lets hope that these factors continue to boost investor confidence and flow of the green back dollar keeps our economy roaring.
image credit: tribune.com.pk