Positivism, progress and productivity backed by the vision of the country's leadership have propelled Pakistan into the international spotlight.
"There is nothing more important for a man but what he strives for, says the Holy Quran. Fellow countrymen do not stop striving, for we need every drop of the strive, turned into action, turned into productivity for this precious land."
— General Pervez Musharraf, President of the Islamic Republic of Pakistan.
When you consider how Pakistan has rebounded from a sluggish economic situation that dominated the 90s and the devastating earthquake that rocked Muzaffarabad and the country in 2005, it is apparent the president's call was heeded.
It's not just the dogged resilience of the country's people that has helped propel Pakistan into the international spotlight. Positivism, progress and productivity backed by the vision of the country's leadership and growth in sectors such as industry, agriculture, banking and services have also made Pakistan a force to reckon with.
Good growth
Statistics in a recent survey released by the Ministry of Finance (2005-06), show that the country's economy has grown at an average rate of approximately seven per cent per annum during the past four years (2002-03 to 2005-06) and by more than 7.5 per cent in the past three years (2003-04 to 2005-06).
These figures are linked to a strong performance in different sectors and the fact that investment has reached as high as 20 per cent of GDP. The public debt to GDP ratio, which was 85 per cent in 1999-2000, also declined to 54.7 per cent in 2005-06. Foreign exchange reserves by the end of April 2006 also touched an all-time high of $13 billion (Dh66 billion) . All these accomplishments have helped Pakistan emerge as one of the top growing economies in Asia.
The Ministry of Finance's economic survey (2005-06) also revealed that the key drivers for growth were the service sectors and industry. Sectors such as large-scale manufacturing, for example, grew by nine per cent, while the services sector continued to perform strongly and grew by 8.8 per cent. The construction industry was also buoyant, as it was fuelled by the private housing market, infrastructure development and reconstruction activities in regions affected by the earthquake in 2005.
Other positive growth areas were consumer spending where real private consumption expenditure rose by 8.1 per cent. This trend is particularly indicative of a growing middle class with a strong purchasing power. Strong economic growth has also contributed to a reduction in unemployment. Figures from the Labour Force Survey 2005 (first two quarters) show that in the period between 2003-04 and the first half of 2005-06, more than five million jobs were created. Per capita real GDP has also increased at 5.6 per cent per annum on average in rupee terms resulting in a rise in the average income of people. Workers' remittances (which averaged to 4.1 per cent of the GDP during the last four years) brought in $4.5 billion (Dh16.52 billion). Remittances were one of the major sources of external finance for Pakistan.
Private sector investment
The country's private sector investment grew by 31.6 per cent during the year, while public sector investment increased 46.7 per cent compared to the previous year's figures. There was also a large rise in credit to the private sector despite the tight monetary policy of the State Bank of Pakistan. The amount expanded by 20.2 per cent (Rs345.1 billion, Dh20.87 billion) during July-April 22, 2006 compared to growth of 28 per cent or Rs357.4 billion (Dh21.62 billion) during the same period last year.
According to official statistics, the total borrowing by this sector during the past three years amounted to more than Rs1100 billion (Dh66.54 billion) against the cumulative borrowing of Rs921 billion (Dh55.71 billion) in the previous 18 years by the sector. This reflects the faith of the private sector in the macro-economic trends in the country.
According to the Ministry of Finance, the growth in consumer loans was also strong, and the scale of the loans expanded by 27 per cent to Rs67.2 billion (Dh4.06 billion). A majority of consumer loans were used to finance automobiles (Rs23.2 billion, Dh1.40 billion), personal loans (Rs21.5 billion, Dh1.30 billion), credit cards (Rs10.4 billion, Dh629 million) and house building (Rs10.1 billion, Dh611). There were some disappointments though. Agriculture, one of the pillars of the economy, didn't live up to the expected growth with the exception of the livestock segment.
The export sector, on the other hand, performed well. Statistics for exports during the first nine months of fiscal year 2005-06 showed an increase of $1.89 billion (Dh6.94 billion) over the same period last year. Of this increase, 61.4 per cent or $1.16 billion (Dh4.25 billion) came from textiles followed by other manufactures (20.9 per cent or $395.7 million, Dh1.45 billion), primary commodities (11.1 per cent or $209.6 million, Dh7.69 million) and other exports (6.5 per cent or $124.5 million, Dh457 million).
Export market
Countries such as the US, Germany, Japan, the UK, Hong Kong, the UAE and Saudi Arabia accounted for 50 per cent of Pakistan's exports. The US is the single largest export market for Pakistan, accounting for 27 per cent of its exports.
Statistics from the Consulate General show that the UAE has emerged as the second largest destination of Pakistani exports. Total trade touched $4.25 billion (Dh15.60 billion) in 2005-06. Petroleum products, rice, synthetic fabrics, cotton fabrics, leather products and knitted and crocheted fabrics were some of the major exports to the UAE.
A 2006 World Bank country review has attributed this impressive turnaround in the economy to the government's ambitious reform programme launched in 2000. The overview states that both external and internal balances have strengthened and reserves now cover five months of imports. Social and poverty-related expenditures were also increased from 3.8 per cent in 2001-02 to 4.8 per cent of GDP in 2004-05.
Other efforts, including the launching of effective structural reforms to privatise public sector enterprises, strengthen public and corporate governance, liberalise external trade and reform the banking sector, have also proven beneficial.
Infrastructure development has also been strong especially in areas such as road, air and rail transport. This has also created a potential for further investments. Road and railway networks saw increasing traffic and profits, as did the Karachi Port and Port Qasim.
According to figures published in the Ministry of Finance's Economic Survey (2005-06), Karachi Port also handled 24.57 million tons of cargo during July-March, 2005-06, compared to 21.84 million tons during the same period last year, an increase of 12.5 per cent. Port Qasim has handled 16.8 million tons of cargo during July-March 2005-06 compared to 16 million tons of cargo handled during the corresponding period last year, a growth of five per cent.
Mobile subscriptions and access to the internet also increased. The total tele-density (fixed, cellular, WLL) jumped from 3.7 per cent in 2001-02 to 23.1 per cent by end March 2005-06. Internet facilities were also extended to 2,339 towns and villages by March 2006.
The privatisation programme, though, has been instrumental in pushing economic progress. Pakistan has been aggressively pushing for comprehensive and broad-based privatisation in sectors such as banking, telecom, oil and gas, steel and the fertiliser sector. This has also got the international investor community very interested. Statistics from the Board of Investments show that privatisation accounted for $1.54 billion (Dh5.65 billion) of foreign direct investment (FDIs) in 2005-06, which was almost half of the FDI total for the country.
The banking sector, in particular, is seeing international banks such as Standard Chartered looking at acquisitions in Pakistan's banking sector. ABN Amro, Barclays, Temasek and several others are doing the same. Figures from Deutsche Bank in a report on foreign banks in Pakistan in the Institutional Investor show that of the 39 commercial banks in the country, 11 are foreign. Several banks from the Middle East including the Dubai Islamic Bank Limited are also active in the region.
Pakistan's position next to oil and gas-rich regions in Central Asia and the Middle East and its proximity to China has also helped attract investments from China and Gulf countries, including Kuwait, Saudi Arabia and the UAE, especially in projects such as the Gawadar port and other infrastructure projects.
Good infrastructure
"Our bilateral relations with China are good. China has entered into a free trade agreement with Pakistan, and has accorded tariff reductions on some Pakistani products and vice versa. China's western provinces are also using our ports to transport their products because of their geographical proximity to Pakistan. A number of countries are also using Pakistan to re-export their products," says Bilal Khan Pasha, Commercial Secretary, Consulate General in Dubai.
The UAE is also a large contributor and has now become the largest source of FDI in Pakistan. Figures from the Consulate General show that of the total FDI of Rs3.52 billion (Dh213 million) for 2005-2006, the UAE poured Rs1.49 billion (Dh90 million) into sectors such as telecom, finance, construction, food and petroleum refining. Some UAE companies present in the country include Emirates airline, Warid Telecom, Tejari and Emaar.
Promising future
The future seems even brighter considering the direction the leadership is steering the nation towards.
In fact, the State Bank of Pakistan's first quarterly report for FY-07, shows that the chances of achieving the seven per cent growth rate target is strong.
"We are seeing the textile sector, engineering industry, especially the auto segment, cement, pharmaceuticals and agro-processing industries doing very well. We are also focusing on developing small and medium enterprises, because their contribution to the economy is invaluable. This labour-intensive sector also has an important role in providing employment," says Pasha.
The World Bank's overview of the economy also states that there are signs the reforms initiated by the government have begun to pay dividends in the form of improved human development outcomes.
Figures from the Pakistan Social and Living Standards Measurement Survey (PSLSMS) show that literacy rates of the population aged 10 years and older have increased to 53 per cent compared to 45 per cent in 2001-02. Female and male literacy — at 57 and 80 per cent (in 2004-05) respectively — have also increased. Other steps in the right direction is the passing of the Women's Protection Bill (November 2006) and President General Pervez Musharraf's five-point plan for the empowerment of women, which was announced last year.
Pasha says the government is also putting in huge resources and developing infrastructure and other sectors in areas such the North West Frontier and Balochistan.
Even the country's leaders are optimistic about keeping the momentum of growth going. During a recent meeting with Shengman Zhang, CitiGroup's Vice Chairman of Global Banking for the Asia Pacific, last month Prime Minister Shaukat Aziz said he expected the FDI to surpass the $5 billion (Dh18.36 billion) mark by the end of the year. He expected investments from all over the world, especially the Far East, as a consequence of Pakistan's 'look east' policies. Increasing FDI will definitely help meet the challenges of the current account deficit caused by high oil prices and rising imports.
Growing economy
In an interview that appeared in the Institutional Investor, the prime minister also said that his medium-term outlook for the economy is six to eight per cent growth (a target which has to be reached within four years).
"The economy in every area is growing. We are creating a middle class, demand is growing, and the people want a better life. The size of the economy has more than doubled in seven years, per capita. All these point to an economy which has a lot of promise."
