STRUGGLES FOR SURVIVAL, INDEPENDENCE CHARACTERISES HISTORY OF PAKISTAN
Aug 17 - 23, 2009
Since inception, Pakistan has been facing complex issues on political and economic fronts. At the time of creation of Pakistan, there was no education, no industry, no agriculture, no trade, no commerce, and above all no infrastructure. However, with the passage of time, the country's economy, despite various shocks has managed to come out of pressure.
The history of Pakistan can be divided into two distinct struggles of epic proportions; the struggle for independence and the struggle for survival. The struggle for the independence of Pakistan culminated in the creation of Pakistan albeit at great human cost. However, the struggle for survival continues despite the nation having sacrificed a lot, both in terms of precious human lives and socio-economic development. The people of Pakistan have lived through difficult times. The country survived despite many odds and its dismemberment. Today, the people are facing worst power crisis that is not only hitting hard to the country's economy but also badly affecting the fellow citizens.
Now, Pakistan's critical issue is still the bad state of its economy. It has inflation rate in double figure, prices of essential items have been rocketing high and lack of investment in power generation capacity by the previous rulers have halted wheels of industry causing unemployment. The current state of our economy is related to war on terror with horrendous spillover affects on the rest of Pakistan. Americans bomb in the northern areas, the terrorists react to it by bomb blasting in rest of the country are making investors insecure and unsafe thereby hitting hard Pakistan's economy.
In the back drop of Pakistan's economic outlook, first we need to understand that high inflation, surge in oil prices, security concerns, decline in FDI, widening trade gap and persistent load shedding are hitting hard to the country's economy.
The Foreign Direct Investment (FDI) has always been a reflection of the success of foreign policy of any country but FDI statistics in Pakistan are presenting a glomming picture, which is not a good omen for economy at all. During the financial year 2007-08, the volume of US direct investment in Pakistan was $ 1,309.3 million, while in FY 2008-09 it was $ 875.3 million. Similarly, during FY 2007-08, volume of UK investment in Pakistan was $ 460.2, UAE $ 589.2, Japan $131.2 million and Hong Kong $ 339.8 million which came down to $263 million, $178.2 million, $74.3 million and $156.1 million respectively during FY 2008-09. There was 31.2% decrease in FDI during FY 2008-09 as compared to FY08 while 51% decrease in total foreign investment in FY09 as compared to FY08.
Chief Operating Officer of Abbasi & Company Mohammad Ishaq Abbasi, while sharing his views about the problems being faced by the country's economy, said high inflation rate, surge in oil prices, depreciation in Pak rupee, decline in FDI, security concerns, load shedding are major issues confronted to the national economy. He said inflation remains the biggest threat to our economy, jumping over 25% in October 2008 before decelerating this year in June 2009 to 16 month's low of 13.13%. Depreciation in rupee, which has fallen from 60-1 USD to over 83-1 USD in a few months, security concerns resulting from our role in the War on Terror have created great instability, decline in FDI from a height of approximately $8.4bn to $4.6bn for the current fiscal year and extending trade gap as import growth exceeds export expansion causing the current account deficit to grow.
Talking about Pakistan's Stock Markets, Mr. Ishaq Abbasi said prior 2008 recession leading international magazine "Business Week" declared KSE-100 Index as the best-performing stock market index in the world. Post 2008 General Elections, uncertain political environment, and aforementioned factors resulted in the steep decline of the Karachi Stock Exchange. Now with the SBP tighter and stable monetary policies in an effort to conserve economic growth has contributed in reduction of money-market interest rates and the inflation may drop back to single digits in 2010. Further Pakistani government is now pursuing an export-driven model of economic growth successfully implemented by South East Asia and now highly successful in China.
Recent announcement by the Ministry of Water and Power Development that load shedding will end through employing rental power units and that the country will be self-sufficient by the year 2011.
Mr. Ishaq Abbasi said Pakistan has a growing upper and upper middle class, estimated at 6.8 million in 2002 and projected to grow to 17 million people by the year 2010, with relatively high per capita income. Thus middle term, however, may be less turbulent, depending on the political environment/militants actions and the GDP may pick up to over 4.5% per annum by 2011-12. "This all contributes to my optimistic view on Pakistan's Stock Markets from medium to long term." At these levels, Benchmark KSE-100 Index seems to be consolidating itself supported by healthy corporate announcements. Had not been the uncertain political environment in the country and Pakistan's participation in war on terror, KSE 100 Index would have been trading above 9500 point's level currently.
According to him, oil, utility, energy, fertilizer and cement stocks are still trading at discounts and can provide growth and value to investors' in medium to long term.
He further said the Securities and Exchange Commission of Pakistan (SECP) registered 243 companies during the month of July 2009, bringing the total corporate portfolio of registered companies to 53,424.
Of 243 companies incorporated during July 2009, 240 companies were limited by shares, comprising of 2 public unlisted companies, 224 private companies and 14 single member companies. In addition, 2 associations not for profit under section 42 of the Companies Ordinance, 1984 (the 'Ordinance') and one foreign company were also registered. Total authorized capital and paid up capital of 240 limited by shares companies, incorporated during July, 2009 amounted to Rs.1,463.9 million and Rs. 451.4 million respectively.
During July 2009, number of new incorporation was highest at Lahore, whereby 91 companies have been registered, followed by Islamabad registering 66 companies, Karachi with 59 companies. Peshawar, Quetta, Faisalabad, Multan, and Sukkur registered 13, 1, 6, 6, and 1 company, respectively. Major share of new incorporation was witnessed in the trading sector comprising of 44 companies, followed by 26 each in services and construction, 19 in information technology sector and 14 in tourism sector. During the month, the Commission granted licenses to 2 associations not for profit under Section 42 of the Ordinance of which one is for promotion of education, and other for social services.
Commenting on the state of country's economy in the backdrop of decline in FDI, businessman Mohammad Pervaiz Malik said foreign investment plays key role in making the economy of any country stronger, as it helps to initiate new ventures, promotes industrialization, creates new jobs and enhances government revenue. He said present regime has failed to convince even countries like USA and UK to increase their investment and support economy of Pakistan.
Pevaiz Malik said though economic crisis is getting further deepening with every passing day but instead of evolving efficient policies, government has found an easy way and put on stake the future of Pakistan by borrowing from IMF and other financial institutions. He urged upon the government to take steps on war footing to attract foreign investors otherwise situation would go out of control.
He said government should bind Pakistani diplomats posted abroad to make extraordinary efforts to improve the Pakistan perception in the eyes of the developed world. He said Pakistan embassies abroad should keep continuous liaison with the businesspersons and investors of their respective countries and strive hard to convince them to make investment in Pakistan. He said that huge energy crisis is also a major reason to decrease the investment in Pakistan. At the time when a large number of industrial units have been closed down due to more than 12 hours load shedding, how one can expect of any new foreign project.
The Vice President of SAARC Chamber of Commerce & Industry Iftikhar Ali Malik said that the government would have to evolve a methodology for cutting the cost of doing business in Pakistan. To achieve the goal, there is a dire need to cut the rate of markup considerably as on the one hand it would help make Pakistani merchandise competitive at the global market on the other it would expedite the process of industrialization in the country. He said improvement of Pakistan's perception in the eyes of potential foreign investors should be the cornerstone of all the policies made for the future. As the law and order situation must be given priority to attract foreign investment. Human resource availability and its development is an important aspect, which must not be ignored, he said.
The Lahore Chamber of Commerce and Industry (LCCI) President Mian Muzaffar Ali said that he understands well that there is no overnight solution of the problems but definitely, there is a dire need to set a direction in the larger interests of the country.
Mian Muzaffar Ali said, "I strongly believe that today, we as a nation hold the utmost responsibility to deliver. We need to stop borrowing a few breaths in the form of funding from the international donor agencies or our debt repayments just so we can go for a few more steps yet not look for the cure for what we are plagued with." "We understand that interim relief might be absolutely necessary for right now to continue, we need to start thinking of a long-term solution to our ills."
We must have political stability if we are to industrialize. Political stability can only come with political maturity. Our politicians must now attempt to raise the stature and level of their politics from the present day classroom type boyish squabbles to more constructive criticism of their opponents. They must set themselves down to the task of nation building, he added.
The LCCI President said that the law and order situation is indeed alarming these days. How can you expect any investment in this kind of scenario? Where even the local businessperson is shy to invest, how can you attract foreign investment? We seem to have lost our sense of direction. There is no discipline or respect for the Law left in our society. We will have to develop such a political and judicial system, in which the common citizen must be assured of the safety of his person and property. He must be confident of being able to obtain justice when wronged. We cannot achieve economic development in a situation when people cannot properly sleep due to fear of some untoward happening in the surroundings.