Pakistan - Market Overview of 2017

Discusses key economic indicators and trade statistics, which countries/companies were dominant in the market, the U.S. market share, the political situation, the top reasons why U.S. and Chinese and other  companies should consider exporting to pakistan, and other issues that affect trade, e.g., terrorism, currency devaluations, and trade agreements.


The United States and Pakistan have a strong economic and commercial relationship, conducting two-way trade of approximately $5.6 billion in 2016. The U.S. is Pakistan’s largest trading partner and a leading source of foreign direct investment.  U.S. exports to Pakistan reached $2.1 billion in 2016, a 39% increase over the 2014 figure of $1.5 billion. The U.S was Pakistan’s largest export market in 2016.  Pakistan’s exports to the U.S. in 2016 were $3.4 billion, a 9% decrease versus the previous year.

In 2013 Pakistan had its first democratic-to-democratic transition of power between former Pakistani President Asif Zardari of the People’s Political Party and current Prime Minister Nawaz Sharif of the Pakistan Muslim League (Nawaz), after decades of intermittent military coups.  A new round of elections is currently on track for 2018.  This relative political stability has been accompanied by macroeconomic stability, aided by lower global oil prices.  Pakistan’s recent completion of its IMF program and the strong performance of the Karachi Stock Exchange have made Pakistan a more attractive market for foreign exporters and investors seeking new business opportunities.

With a population of approximately 190 million and an overall GDP close to $300 billion, Pakistan is the seventh-largest market within the Middle East, Africa, and South Asia regions, as measured in PPP.  It has experienced GDP growth of more than 4 % in each of the last three years, registering 4.7 percent in 2016, and is forecasted to increase to above 5 % GDP growth in 2017 and 2018.  Pakistan has a young population and a growing middle class, with English as the lingua franca of the business community, and a highly evolved services sector that contributes 56% of GDP. Pakistan has a number of attributes that make it an attractive market for multinational firms, particularly those in the fast moving consumer-goods sector, but also in infrastructure development.  The World Bank’s 2017 Doing Business Report, which surveys the ease of doing business in international markets, ranked Pakistan 144th among the 190 economies surveyed. By comparison, regional competitors India and Bangladesh ranked 130 and 176, respectively.

American firms have a strong presence in Pakistan. Currently, there are more than 65 wholly- or majority-owned U.S. subsidiary firms registered with the American Business Council (ABC) of Pakistan and the Lahore-based American Business Forum (ABF). The U.S.-Pakistan Business Council, an affiliate of the U.S. Chamber of Commerce and based in Washington, is another forum for U.S. companies with business and investment interests in Pakistan. There are also hundreds of local firms representing U.S. companies in the market. Some leading U.S. companies doing business in Pakistan include Pepsi-Cola, Coca-Cola, Procter & Gamble, NCR, Teradata, Pfizer, Abbott Laboratories, DuPont, Oracle, Microsoft, Dell, 3M, IBM, Monsanto, McDonald’s, KFC, Pizza Hut, Domino’s Pizza, and Caterpillar.

Pakistan and the United States signed a Trade and Investment Framework Agreement in 2003, which provides a forum for discussion of bilateral trade issues. The most recent annual TIFA intercessional meeting was held in June 2017.  The U.S. corporate members of the ABC and ABF play an influential role in Pakistan’s economy by demonstrating global standards of corporate governance. According to the ABC, these companies have collectively invested over $1.5 billion in Pakistan and their cumulative annual revenue is about $4 billion. ABC/ABF members contribute a sizable sum to the national treasury every year in the form of direct and indirect taxes. In spite of security threats and familiar emerging market concerns over intellectual property rights, contract enforcement, and governance issues, the Pakistan market offers many attractive trade and investment opportunities. With regard to investment, the market has few restrictions on the movement of capital for foreign companies, no shareholding restrictions (beyond a few sensitive industry sectors), simple work-permit rules, no technology transfer requirements and a large and sophisticated entrepreneurial class.

ABOUT FUTURE


The strategic ties between Pakistan and China have been on an upward trajectory with a visible thrust on economic interaction after the initiation of China Pakistan Economic Corridor (CPEC) Project. CPEC is a revolution in the field of economics. Under CPEC, China would invest $46 billion in Pakistan for the development of infrastructure and energy. CPEC is a futuristic economic dimension of Pakistan in the 21st century. This multi-dimensional project has opened Pakistan’s re-balancing options from geopolitics to geo-economics.