Question

International business

1. What is the current status of Pakistan in the world market place? support your answer with research. please give citiation.

2. What is the ease of doing business in Pakistan? support your answer with research. please give citiation.

3. Are other countries wanting to invest in Pakistan? support your answer with research. please give citiation.

4. What do you see as the future of your country in the world market place? support your answer with research. please give citiation.

Answer 1

Answer 1). According to World Bank report Pakistan ranks fourth in terms of value (4.2 billion dollars) with the same global market share as Sri Lanka, although apparel’s share of total country exports is lower at 19 percent. Foreign direct investment (FDI) has not played an important role; in the apparel sector, the share of foreign-owned firms is estimated to be less than 2 percent, and only slightly higher in the textile sector. Wages and working conditions are better in the formal industry than in the large cottage sector, but short term or temporary contracts are widely used, particularly for women. The September 2012 factory fire in Karachi recently highlighted poor safety standards in the country. Pakistan can benefit from the following policies: increase product diversity by reducing barriers on imports so as to ease access to manmade fibers (such as duty and tax remission for exports, and export processing zones); attract foreign direct investment (FDI) by adopting policies to reduce red tape and increase transparency to close the gap with South Asian countries whose textile and apparel industries are located primarily on the coast; diversify markets by taking advantage of access to emerging markets; shorten lead times by improving road infrastructure to facilitate access to ports for exporting firms; shorten lead times by clustering strategies to provide key infrastructure and common facilities; enhance perceptions of stability as many buyers will not travel to Pakistan, which makes sourcing complicated.

Answer 2) Pakistan has slipped three places on the Word Bank’s Ease of Doing Business Index and is now ranked a lowly 147th among 190 economies, denting the government’s pro-business image ahead of next general elections.

The index is mostly used as a guide by foreign investors to learn more about a country, aiding decisions on pouring in money in the economy.

Pakistan, however, slipped from its last year’s rating despite the introduction of some reforms in areas of starting a business and making international trade relatively easier. If one government department is to be blamed for the overall poor performance, it is the Ministry of Finance, as the country’s ranking nosedived on the indicators of paying taxes and getting credit.

The World Bank released the Doing Business 2018 report on Tuesday that covers 190 economies and measures how close each economy is to global best practices in business regulations.

In South Asia, Bhutan, at the 75th place in the Doing Business rankings, is the highest-ranked economy followed by India (100) and Nepal (105). Pakistan, at the 147th position, was at number 6 in South Asia followed by Bangladesh (177) and Afghanistan 183.

International investors consult the report and the Global Competitiveness Index of the World Economic Forum before taking decisions about their investment plans.

This year, Pakistan did make it easier to ‘start a business’, ‘register property’, ‘strengthened minority shareholders protection’ and made it easier to ‘do trade across the border’. It also introduced electronic processing of documents for exports and imports and strengthened port infrastructure.

The report is based on surveys carried out in Karachi and Lahore.

Answer 3) The potential attractiveness of Pakistan for investment is lower than India, its neighbour, but equal to Sri Lanka and Bangladesh. However, its performance in terms of actual reception of FDI is poor and the FDI influx is still far from peak levels of 2007-2008 (USD 5.4 billion). This situation is unlikely to improve, as the country has a rather negative image on the international level, considered a rear base of terrorist groups. A challenging security environment, electricity shortages, and a burdensome investment climate also hinder investments. Pakistan ranked 147th out of 190 countries in World Bank’s 2018 Doing Business Report.

Other countries that made significant investments in November 2017 were US ($16 million), Luxemburg ($13 million), France ($10 million) and Singapore ($7.4 million).

Total FDI in the first five months of fiscal year 2017-18 touched $1.146 billion, up 57% compared with $729 million in the same period of the preceding year.

In July-November FY2017-18, Chinese investments in Pakistan jumped to $837 million, up 286% compared with $217 million in the corresponding period of previous year.

The second highest FDI came from Malaysia, which amounted to $113 million in the first five months, up 927% compared with just $11 million in the corresponding period of previous year.

France stood at third position with investment flow of $48 million and the US at fourth with $43 million. Hungary brought $33 million, the Netherlands brought $32 million and the UAE injected $26 million.

Sector-wise investment

The power sector received the highest FDI in November 2017 as the country got $117 million for the sector while the construction received $94 million.

So far, in the first five months of FY2017-18, the power sector led the FDI inflow, which stood at $539 million. Analysts believe this is happening due to investments going into mega power projects under the CPEC.

Overall, the construction sector came at the second place as it received $271 million in the first five months of FY2017-18. Other notable sectors were financial business ($75 million), oil and gas exploration ($74 million) and trade ($57 million).

Analysts say while Chinese investment is crucial, other countries including the US and western European countries have been increasingly shying away since the financial crisis of 2008, which should be a cause for concern for policymakers of the country.

Pakistan received $2.41 billion in FDI in the fiscal year ended June 30, 2017, up 5% from $2.3 billion in the previous year. It got $5.4 billion in 2007-08, which was the highest inflow in the country’s history, according to the Board of Investment.

However, the country has been recording low levels of foreign investment since 2008. Many foreign investors, especially from western countries, have pulled out due to persistent energy crisis, poor governance and security challenges.

FDI to Pakistan recorded a 15.6% increase in net FDI in July-February 2017-18 as compared to the same period in 2016-17, reaching USD 1.9 billion. Energy, construction and oil & gas sectors continue to be the primary recipients of FDI in Pakistan. Country-wise, China is by far the biggest investor in Pakistan.

Answer 4)  Pakistan: building a strong foundation to join the emerging markets

How is Pakistan positioned in this constellation of global factors? The good news is that Pakistan has already begun to strengthen its drivers of growth.

Just three years ago, the country was on the brink of an economic crisis. Today, and thanks to the authorities’ homegrown program of reforms that the IMF supported, the economy is on a much stronger footing. Public finances have improved considerably, external reserve buffers have been rebuilt, and growth has been gradually strengthening. These are very encouraging developments.

Pakistan has also made important strides in growth-supporting policies. A clear example is the power sector. Not everything has been resolved, but disruptive power outages have come down—from about nine hours to one hour per day for industries, and from eight to five hours for urban consumers.

Costly and inefficient subsidies were reduced. These subsidies disproportionately benefited the more affluent. And the accumulation of power sector arrears, also known as circular debt, has also significantly decreased. These are major achievements.

There have been equally important achievements on the budget revenue side. By closing tax loopholes and setting up a more targeted approach to widen the tax base, revenue collection improved by 2 ½ percent of GDP over the past three years.

These tax reforms matter. Why? Because efforts to mobilize higher revenues have freed up resources to raise public investment and to strengthen social safety nets. For instance, more than 1½ million new beneficiaries were added to the Benazir Income Support Program, and the program’s cash stipends were raised by more than 50 percent. This is an important step since 30 percent of the population still lives below the poverty line.

Having achieved such difficult reforms, the economy has come a long way. Now, with a more resilient economy and growth picking up, Pakistan has reached a moment of opportunity. It can now embark on the next generation of reforms to generate higher and more inclusive growth, and tap into the dynamism of emerging economies.