Pakistan has the lowest rate of female entrepreneurship in the world, with merely 1% of female entrepreneurs compared to 21% of male entrepreneurs. Access to finance is one of the factors that has prevented women from engaging in entrepreneurial activities, with only 5% of women having access to an account at a formal financial institution. Beyond this, there are many structural, institutional and socio-cultural barriers that restrict the entrepreneurial capabilities of Pakistani women. Below are some examples which show that we can bring more women into the formal financial sector. Chimera (Laraib Zamir) Laraib Zamir has emerged among a group…
Author: Ahsan Nisar
The life insurance market for women is large, growing, and underdeveloped. This is particularly true for working mothers who have a need to protect their children from unanticipated financial risks and enhances their ability to pay for long-term insurance products. The life insurance market growth for working mothers is accelerated relative to other markets, yet life insurance companies deliver generic life insurance policies that only consider gender as an actuarial factor. This article proposes a solution of partnership with a designated life insurance company to develop a term life insurance product called HerLife. It will uniquely cater to working mothers…
The large-scale manufacturing (LSM) sector has 80 percent share in manufacturing and 10.8 percent share in the gross domestic product (GDP) whereas small-scale manufacturing has 13.8 percent share in manufacturing and 1.9 percent in GDP. The sector is poised to grow further if the consumer durables and construction-allied industries continue to benefit from higher retail spending and infrastructure activities in the country. However, economic activity is likely to slowdown in FY19 as the general macroeconomic policy mix is focusing towards stabilization. The recent monetary and fiscal measures would likely impact large-scale manufacturing due to rising inflation and large twin deficits.…
Manufacturing is considered as backbone of economy for Pakistan which provides employment opportunities to a bulk of population. It is second largest sector of the economy with a share of 10 percent to GDP. The sector is mainly divided into three sub-sectors namely Large-Scale Manufacturing (LSM) Small Scale Manufacturing (SSM) and Slaughtering. The growth of manufacturing sector is dependent on better availability of utility services, enabling environment, credit to private sector and capital market gains etc. The growth of this sector suffered in past due to non-availability of the desired inputs and poor law and order situation. The major hurdle…
Most countries have liberalized their policies to attract investments from foreign multinational corporations (MNCs). On the expectation that foreign MNCs will raise employment, exports, or tax revenue, or that some of the knowledge brought by the foreign companies may spill over to the host country’s domestic firms, governments across the world have lowered various entry barriers and opened up new sectors to foreign investment. An increasing number of host governments also provide various forms of investment incentives to encourage foreign owned companies to invest in their jurisdiction. These include financial incentives such as tax holidays and lower taxes for foreign…
If Chinese investment in Pakistan was a confidence booster for international investors, the recent announcement by present government regarding re-evaluation of China Pakistan Economic Corridor CPEC projects may prove to be a dampener for them. Local and international investors are holding back, watching the developing situation in Pakistan with caution. After witnessing surge in Foreign Direct Investment (FDI) through investment in FMCG (fast-moving consumer goods), telecom and automobile sector, Pakistan has not been able to attract major investment since 2016. A recent example is the cancellation of Jazz-Edotco deal amounting US$ 940 million. However, the situation is not altogether gloomy…
While the government has protected CPEC (China Pakistan Economic Corridor) funding in its mini-budget, it has, however, indicated that it will re-evaluate projects to arrive at a win-win situation for both Pakistan and China, without undermining the strategic importance of Belt & Road Initiative (BRI) of which CPEC is a part. Some say that it has been done keeping in view the debt burden and current external account position, while others say that it is a move to appease the US, which hinted at blocking IMF funding for settling Chinese loans if Pakistan approached its window for the 13th time. The latter is to be seen in…
It is said that whether elephants love or hate, the grass underneath their feet gets crushed. Same is the case with Pakistan. The US and China are on the verge of sparking a trade war after both slapped tariffs on each other on key imports. This is serious not just for the US and China, but for the entire global economy in particular and Pakistan, in general. The debate between protectionism and liberalization has ensued once again. But amid the gloom surrounding the globe with respect to protectionism there is a force in the works that could deliver a strong impetus to trade liberalization through…
The last fiscal year concluded with a mammoth fiscal deficit of 6.6 percent of GDP (Rs2.260 trillion) and a record $18 billion (5.7 percent of GDP) current account deficit. It was in this backdrop that the government came up with the ‘mini-budget’, highlights of which are as under: Excise duty on cars of 1800cc and above doubled. Ban on car, property purchases by non-filers withdrawn. Banking transactions of non-filers to be taxed at 0.6 percent. Regulatory duties on additional 312 items. China-Pakistan Economic Corridor (CPEC) spending protected. With cut in development expenditures and reversal of tax exemptions, the government aims…
A welfare state is one where the state undertakes extensive intervention in the society to assist and protect those who are hit by some calamity or are underprivileged. In other words, the state provides a form of social protection. Most countries, including Pakistan, already have some welfare policies. For example, the Benazir Income Support Program is a welfare program for those living in poverty. The first thing which is common among the welfare states of the world is they collect a large proportion of their GDP in taxes. Norway collects 38 percent, Denmark about 45 percent and Sweden about 44…
Pakistan’s housing backlog has reached almost 11 million units. Only one percent of the housing units developed annually cater to 68 percent of Pakistan’s total population, comprising people who earn a maximum monthly income of Rs30,000. On the other hand, almost 56 percent of housing units target 12 percent of the population, comprising individuals with a monthly income of Rs100,000 and above. Currently, the housing shortage is estimated to be over ten million units with demand growing at a rate of 0.6 million new units per year. Constructing 0.6 million new housing units a year just to meet fresh demand…
Low cost housing for a vast majority of the people poses an enormous challenge in terms of availability of affordable land and finances. The problem is rooted in socio-economic conditions and the solutions are handicapped by obstacles in the lending environment, made worse by speculative investments in real estate and lack of an ‘integrated, broader low-income housing finance strategy. HBFCL (House Building Finance Corporation Limited) is the largest player in the housing market in terms of the number of borrowers, accounting for 42 per cent of new borrowers but even their loan disbursement portfolio is around merely Rs600 million. There…
Every now and then a technological revolution comes in that provides almost every country in the world an equal playing field. No matter how big or small a country is, it always has the opportunity to leap ahead irrespective of national interests and global events. Of late, the unique opportunity available to every country is jumping on the bandwagon known as cryptocurrencies. Pakistan has opted to miss the train as State Bank of Pakistan has officially put a prohibition of dealing in virtual currencies/tokens. On the other hand, Japan has embraced cryptocurrencies and only time will tell how the decision…
With rising mobile phone adoption, maturing 3G/4G telecom services, rapidly growing mobile money solutions and innovative initiatives like QR codes and mobile wallets, the digital landscape of Pakistan is all set to change. Other recent innovations include MasterPass/Fone Pay and SimSim etc. The industry expects the number of merchants to increase to 100,000 from the current 30,000. The creation of this addition to our ecosystem will help reduce financial exclusion. Masterpass Masterpass is a digital payment service that allows you to check out faster by storing all your payment and shipping information in one secure location. Fone Pay Powered by…
The newly installed government in Pakistan faces a number of mammoth tasks like foreign policy issues, weakening currency, booming population, maintaining momentum of GDP growth targets and continuous struggle with energy policy. In order to counter these challenges, the government is bound to take some unpopular steps like increasing tax collection, austerity measures, import substitution and privatization etc. The key areas identified for improvement during the first 100 days were governance, economy, federation, agriculture, water, society and security. So far 21 days have elapsed and only one target of championing green growth has been achieved while 12 are in progress.…
The Pakistan economy and a significant proportion of its population depends on the flows of remittances from overseas workers and the broader Pakistani diaspora. At over US$20 billion in official remittances expected in FY 2018-19, they provide critical support to a precarious current account situation. Remittances to households also have a favorable impact on poverty reduction and job creation. Also accounting for around 7 percent of GDP, remittances inject much needed additional aggregate demand into an economy that has been struggling to maintain the momentum for the last few years. By the close of Amnesty Scheme 2018 on July 31,…
Pakistan currently ranks 135th in the list of global emitters of carbon on a per capita basis, accounting for less than 1 percent of total global carbon emissions, according to World Bank data. According to the report submitted by Pakistan to the UN Framework Convention on Climate Change last year, the country’s emissions in 2015 stood at 405 metric tonnes of carbon dioxide equivalent (MTCO2 eq.). However, emissions are increasing at a rate of 3.9 percent (16 MTCO2 eq.) annually. Pakistan is also considered one of those countries most vulnerable to the impacts of climate change, from worsening floods and…
The insurance industry in Pakistan contributes almost 0.9 percent of the gross domestic product, of which Takaful industry shares 3 percent of the insurance industry, whereas insurance sector in India contributes 3.8 percent of total GDP and Turkey, where the contribution is 1.45 percent of GDP. In the 200 million plus population of Pakistan, insurance penetration is very low where the majority of the population is left uninsured and unaware. Awareness amongst the masses is the biggest challenge. As 75 percent of our population falls in the lower income bracket located in undeveloped rural areas, the poverty level of such…
From 2001 onwards, the insurance sector saw a consistent improvement in terms of structure and growth. Specifically, higher per capita income, expansion in trade sector, and the growing private sector credit spurred the exceptional growth in the insurance sector. Importantly, this growth was broad-based, as both the life and non-life insurance sectors witnessed double-digit growth although life insurance sector continues to dominate the insurance industry. The concept of life insurance has evolved from a primary emphasis on conventional insurance protection to a relatively advanced form of a savings product. Life insurance products enhance the role of insurance in an economy…
Pakistan is a country which is blessed with enormous reserves of natural resources. The economy of Pakistan is growing at the rate of 5.7 percent and consequently the growth demands higher energy consumption. The major energy sources of Pakistan are oil, gas and hydel energy which are backbone of the country. Apart from all these resources, Pakistan is mainly an agricultural country and has a strong potential to produce energy through biomass and agriculture waste. Also, Pakistan has an edge in solar energy and can produce 2.3 million megawatts per annum. Pakistan could also produce energy from biofuels using its…
Pakistan is a net oil importer and meets about 75 percent of needs through imports. Oil imports carry the heaviest weight in total imports of the country. Pakistan has a total refining capacity to process around 400,000 bpd or about 19MTPA of crude oil, against the current demand of 24MTPA. Total global refining capacity is 97 million bpd, and Pakistan, with nominal world share of 0.4 percent, is ranked 48th. Demand for oil products in the country is expected to grow steadily at seven percent on year-on-year basis, according to recent studies, in particular for the furnace oil, motor spirit,…
Out of the five challenges that the incumbent government will have to face after elections, population growth is the biggest, with extremism, economy, water shortages and civil/military relationship being the other four. Pakistan, with its limited family planning, has one of the highest birth rates in Asia at around three children per woman, according to the World Bank and government figures. That has led to a fivefold increase of the population since 1960, now touching 207.7 million. The boom is negating hard-won economic and social progress in the developing country. Analysts say unless more is done to slow growth, the…
Education With the 10th largest labor force in the world, Pakistan has important strategic endowments and development potential. One of Pakistan’s key strengths is the demographic bulge especially growing proportion of young adults. Pakistan has capacity to send across large number of young unskilled/semi-skilled people. Having over 30 million plus population in the age group of 25-35, Pakistan can put this valuable asset by imparting training in different technical fields to respond market needs abroad. Pakistan is currently passing through a demographic transition which has resulted in a ‘youth bulge’ (63% of our population comprising of youth, 69 million aged…
There is little strength in health care delivery system in Pakistan like making health policies, participating in UN’s Sustainable Development Goals program, initiating vertical programs and introducing Public Private Partnership, improving human resource development and infrastructure by making Basic Health Unit and Rural Health Centers. However, all these programs are very limited in their scope and that is the reason that Pakistan’s healthcare system is still not very efficient. There are numerous weaknesses like poor governance, lack of access and unequal resources, poor quality of Health Information Management System, corruption in health system, lack of monitoring in health policy and…
In today’s age, advancements in medical and health science are occurring at an unprecedented pace making possible what once was only a dream. This, however, has come at a cost as medical expenses are also on the rise making vital procedures and even general care at a reputable hospital unaffordable for the general population. To counter this, insurance companies bring affordable and essential health plans that enable their customers to receive top of the line health care without having to worry about financing it. With health insurance, one can pay specific amounts of money each year as premium and he/she…
Gwadar Port is located in southwestern Pakistan near the Iranian border. It is situated on the shores of the Arabian Sea in the city of Gwadar, located in the Pakistani province of Balochistan. The port is located 533 km from Pakistan’s largest city, Karachi, and is approximately 120 km from the Iranian border. It is located 380 km (240 miles) away from Oman and near key oil shipping lanes from the Persian Gulf. The greater surrounding region is home to around two-third of the world’s proven oil reserves. It is also the nearest warm-water seaport to the landlocked, but hydrocarbon…
Pakistan’s 1,200 kilometers lengthy coastline with the Arabian Sea is a god gifted area with natural harbors. It is a mid-sea section which joins the strategic oil line of the Persian Gulf with the Indian Ocean. Pakistan has three big sea ports named as Karachi Port, Muhammad Bin Qasim Port and Gwadar Port. Port of Muhammad Bin Qasim is the oldest port while the Karachi Port is the busiest one. The Port of Gwadar is newly developed deep-sea port and one of the deepest ports across the globe with a depth that can handle 16-meter deep cargo ship. There are several…
Prospects It is a fact that after the tremendous growth in mobile internet, artificial intelligence will soon become the largest future outlet. AI or artificial intelligence – is the science that governs, controls, regulates, and connects all other fields in the world, be they sciences, faculties of engineering, technology, education, or even business. Countries and industries around the globe have been using information technology to develop their businesses by gaining unprecedented expansion. And thanks to new tech startup businesses like Workmatec, Kazola, Botsify, Dcube, Red Buffer, TechinAsia, CricFlex, Farmer’s Lab & Mountainise etc., Pakistan, too, can now benefit from the…
The past few years have been difficult for telecom companies across the world and Pakistan is no exception. Overall revenues and cash flows have dipped despite the fact that consumption of mobile data has increased. This has been mainly because telecom companies have invested heavily in their wireless 3G and 4G networks. Fiscal Year 2018-19 will continue to be a critical time for Pakistani telecom industry as companies will compete intensely for market share in already saturated market. The consumers have become more tech-savvy and companies need to innovate in order to come up to their expectations. As Pakistan moves…
Pakistani society is highly consumption-oriented. This is further accentuated by the fact that consumer spending this Eid-ul-Fit’r crossed one trillion mark. With around fifty points on Consumer Confidence Survey, there is likelihood that mix trend is likely to continue. While rise in global oil prices and third round of Rupee depreciation will cause the inflation to spiral upwards which may subsequently result in squeezed spending patterns, it remains to be seen how availability of excess disposable income will come into play courtesy tax amnesty scheme. From the remittance-receiving perspective, beneficiaries are likely to continue availing the benefit of Rupee depreciation…
“Consumers, by definition, include all of us. They are the largest economic group in the economy, affecting almost every public and private economic decision. But they are the only important group whose views are often not heard”. (John F. Kennedy, 1962). The right to have information about prices of products and services is a very important consumer right. This right is protected under Article 19-A of Pakistani Constitution which states: “Every citizen shall have the right to have access to information in all matters of public importance subject to regulation and reasonable restrictions imposed by law.” This right to information…
In Pakistan, three sectors that have witnessed tremendous growth in terms of innovation and users are Information Communications Technology (ICT), telecommunications and financial services. By joining hands, they could bring millions of marginalized people into formal banking channels. The exclusion of an entire customer base from the formal financial sector has created a window of opportunity for financial service providers in creating digital value propositions. Digital banking is likely to provide huge impetus to financial inclusion. Surrounded by so much potential, it is likely that financial service delivery coupled with technology will have a transformational impact on the country’s unbanked…
The 18th Summit of Shanghai Cooperation Organization (SCO) has recently concluded in the Eastern China’s coastal city of Qingdao. The SCO is a political, economic, and security organization, the creation of which was announced on 15 June 2001 in Shanghai by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. It is the largest regional establishment in the world in terms of geographical coverage and population and is one of the world’s most powerful organizations. Both India and Pakistan officially became member states of SCO on the 17th Meeting of Heads of State Council of SCO in Astana on…
Remittances play a very important role in eliminating poverty of a nation. Remittances not only reflect the domestic labor working in the global economy but also show the connection between growth and integration with the world economy. Hence, remittances improve the integration of countries into the global economy. With the wake of globalization, multiple factors have contributed to labor movement in which better working environment, more opportunities and compensation are on top of priority list. It has been generally argued that globalization has caused loss of power of nation states and dismantled welfare state model that grossly reduced the efficiency…
Pakistanis are one of the most charitable nations in the world. Charitable giving this year will exceed $1.5 billion. As a percentage of Gross Domestic Product (GDP), Pakistanis donate at the same level as Canada and UK and twice as much that of India. Even the corporations here do not lag far behind when it comes to Corporate Social Responsibility (CSR) and charity. Some companies roll out special advertisement campaigns surrounding the theme of Ramazan. The holy month of Ramazan has traditionally been the time of the year when public support has reached a peak, and donations, both zakat and…
Migrant remittances can play a critical role in the economic development of low/middle-income countries. Remittances to developing countries are generally seen as an instrument to reduce poverty and inequality, to provide social benefits and multiplier effects, and to act as buffers against economic shocks. However, the full developmental potential of remittances is far from being realized. While the relevant stakeholders, from the financial institutions to actors from the public sector and the civil society, seem to appreciate the opportunity remittances represents, effective best practices to harness this opportunity are still to be identified. Additionally, expanded access to the financial sector…
Ramazan is that time of the year when expatriates send money to their loved ones back home so that they could celebrate the festive occasion of Eidul-Fitr. The boost during the holy month may also help in arriving at the State Bank of Pakistan estimate of USD 20 billion for the first time in Pakistan’s history. Nevertheless, since Pakistan is a consumption-driven society, hence a meagre amount goes into savings, which results in a low savings rate of 13-14 percent of GDP. Most of the beneficiaries of remittances are highly dependent on the funds sent from abroad and are unaware…
Owners and managers of a large number of SMEs have a deeper craving for Shariah-compliant financial services than large businesses and companies. The conventional banking system has done little to satisfy the borrowing needs of SMEs, thereby making way for Islamic banks to fill the gap. However, the lending to corporate and consumer sector is so huge that it will take Islamic Banking Institutions (IBIs) a long time to increase the share of SMEs in the overall financing mix. Some Islamic banks like Meezan Bank and Dubai Islamic Bank (Pakistan) have already up-scaled their lending to SMEs. For boosting SME…
Islamic mutual fund works in a similar manner as a conventional fund except that the Islamic mutual fund only deploys funds in Shariah-compliant investments. The key players in Islamic mutual fund are: Asset Management Company, Trustee, Shariah Advisor & Registrar. Following are some of the top funds (based on NAV) according to Mutual Funds Association of Pakistan: UBL Al Ameen Funds (Shariah Compliant Money Market — Annualized return) Al-Ameen Islamic Cash Fund (AICF) [formerly UBL Islamic Cash Fund (UICF)] is a mutual fund investment scheme that offers an ideal investment facility, which allows to earn an attractive and stable riba-free…
In Pakistan, the common definition of a literate person is one who could write his/her name in English. According to this definition, literacy rate of Pakistan is 58% (down from 60%) which is very low as compared to regional peers. In 2015, when the UN laid down Sustainable Development Goals (SDGs), quality education was set as Goal No.4 out of 17 goals. The definition of literacy was also modified to cover financial literacy i.e. a person is deemed to be literate if he/she could undertake basic banking transactions.By virtue of this, the literacy rate of Pakistan will be even lower…
In the emerging economies, the significant contribution of private sector for eradicating illiteracy is a well-known fact. For the last three decades, private sector has emerged as a key provider of education services in Pakistan both in absolute terms and relative to the public sector. Private educational institutions and NGOs/NPOsare playing key role not only in eradicating illiteracy but also enhancing the level of students as well as teachers by providing better academic environment. Below are some of the major players in the education sector of Pakistan: Alif Ailaan It is a non-profit organization working in the field of education…
As was expected, the budget for FY 2018-19 turned out to be ‘people centric’ as this is the election year in Pakistan. By curtailing the tax liability of individuals and increasing minimum pensions, the government has tried to woo the voters for the upcoming elections. It remains to be seen whether the effect of increase in family disposable income is off-set by the spiraling inflation or not. The government has come under fire as the cost of relief exceeds revenue measures. The budget has also left the real estate and construction sector disgruntled as they feel they did not get…
From LNG to coal, livestock to stationery, every sector and every type of business enterprise has been showered with exemptions and tax reductions. While chemicals and oil and gas sectors appear to be gainers, steel, construction, real estate, leather and automotive sector will be major losers. This article aims to analyze the impact of budget on various sectors: Oil and gas The Finance Act has waived the 3% value addition tax on import of LNG. Rate of sales tax was reduced from 17 to 12% on import of LNG by Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) and…
After investment in energy and transport sector under China-Pakistan Economic Corridor (CPEC), China is now making headways in the e-commerce and banking industry of Pakistan through Alibaba, Bank of China and Industrial Commercial Bank of China (ICBC). Realizing the potential of CPEC, Pakistani banks are also opening their branches and representative offices in China. This article aims to analyze the impact of Chinese foothold in the aforementioned sectors of Pakistan. E-commerce market With foundations well in place for digital commerce to flourish in Pakistan, it is only a matter of time before e-commerce takes the Pakistani consumer market by storm.…
Trade volume between China and Pakistan, which stood at $4 billion in 2008, peaked to $15.6 billion in 2016-17. Pakistan’s exports to China were only $1.5 billion in the last fiscal year while imports amounted to $14 billion, according to Chinese statistics. Under first phase of the Free Trade Agreement (FTA), Pakistan gave duty concessions on 35% of tariff lines, which led to a huge influx of Chinese goods and many local industries could not survive. Under the second phase of FTA, China wants Pakistan to offer zero duties on 75% import tariff lines as a result of which FTA-II…
This is the election year in Pakistan so any discussion on budget is to be read in this context. The corporate tax and Super Tax is likely to remain there, however, there may be some relief on the individual tax front. While it may be debated whether the outgoing government should present the budget or not, the scope of budget is likely to be expansionary as the present government will try to woo the voters to the maximum extent possible. This will be an additional burden on the fiscal deficit which may swell above 6% of GDP. It remains to…
The Pakistan Stock Exchange’s (PSX) KSE-100 was Asia’s top-performing Index in 2016 but 2017 proved to be a nightmare. Equity-based funds posted negative returns in the range of 10 to 20%, while brokerage houses had to be content with low volumes that put a dent on their earnings. From its all-time high of 52,874.46 points it touched on May 24 last year, the Index is hovering in the range of 45,000 due to buying in select oversold stocks. While some say that political uncertainty was the main reason for the downfall, others tout civilian-military rife and exit of the finance…
Pakistan expects to use the multi-billion-dollar Chinese investment to significantly enhance its industrial capacity and economic productivity backed by greater energy supply. It anticipates doing this through improved geographical linkages and upgraded road, rail and air transportation systems that facilitate a higher volume of trade flow. It is also eyeing opportunities of transfer of knowledge and technology with its Chinese counterparts. There has been significant progress in the 21 industrial, 8 infrastructure and 12 Gwadar-related projects that have commenced under the China-Pakistan Economic Corridor (CPEC) banner (with several industrial projects now being operational). 4 rail-based mass transit and 6 provincial…
Food insecurity Pakistan has one of the world’s most impressive agricultural systems but it has not used it well or not being able to manage properly. Agriculture sector is still the dominant sector of the economy with profound impact on rural economy. Its forward and backward linkages particularly with the industrial sector, gives it central place as a useful tool for the economic development of Pakistan. In face of increasing population growth especially in developing countries, limited possibilities of further extension of cultivated land, increasing resource degradation and wide gap between potential and national average yield, productivity growth takes an…
The global steel production has nearly doubled since the turn of the century. Pakistan is the 37th largest in world steel production ranking with per capita consumption of steel remaining pegged to 38-40 kgs per annum – about one-fifth of the global average of 198 kgs. The per capita consumption of steel in the US is around 394 kg, for China it is 338 kg and in India it is around 63 kg per capita. With the advent of China-Pakistan Economic Corridor (CPEC), the construction industry is booming, and with several infrastructural projects still in the pipeline, the steel industry…
Out of some 56 participants, following are the key players of the steel industry in Pakistan: Pakistan Steel Mills Corporation (Pvt) Ltd Established in 1985, Pakistan Steel is Pakistan’s leading steel producer with a production capacity of 1.1 million tons per year. The company specializes in the production of flat steel products including, billets, slabs, hot rolled coils, cold rolled coils, galvanized sheets/coils/formed sections and corrugated sheets. The company is vital to the supply of high quality and cost-effective steel products to the domestic market. Pakistan Steel’s constant efforts in continuous improvement and quality management have resulted in accreditation in…
In any form of business, be it private or public, the importance of risk culture cannot be over emphasized. But when it comes to financial institutions, the dynamics of risk culture change significantly as the nature of banks’ operations make it distinct from all other forms of businesses which call for more intrusive, consistent and strict regulatory regime. Banks, irrespective of their jurisdiction, are required by regulators to establish strong governance, risk and compliance functions to reduce conflict of interests between various stakeholders. However, in spite of enhancement in regulations and supervisory practices, their still remain chances that banks may…
Human resource is the most mobile of the four factors of production and under right conditions it improves with age and experience, which no other resource can do. It is, therefore, regarded as the scarcest and the most crucial productive resource that creates the largest and long-lasting advantage for an organization. To achieve its objectives, any bank undergoes one of the most important processes, which is Strategy Formation. The importance of Strategy Formation is such that it is the business of the Chief Executive of the bank and his senior colleagues, backed by strong analytical support. This process covers very…
Generally, there are misconceptions that current account deficit (CAD) and depreciation of currency are bad omen for any given economy. Talking of current account deficit, it is quite natural for developing economies to have high current account deficit as it indicates faster growth. In any economy goods and services can be either consume, saved or invested. A country with a current account deficit indicates that it is investing more than it is saving, therefore a current account imbalance can simply be viewed as the difference between saving and investment.Historically Pakistan has had a low savings and investment rate. High domestic…
The present economic situation presents some opportunities for Pakistan. But the country also has some serious long-term challenges. Unless the long-term challenges are decisively tackled, such opportunities will only lead to sporadic bursts of growth rather than a sustained upward trajectory. Some of the challenges and prospects faced by Pakistan’s economy are as under: Challenges Mounting debt Rising imports, declining exports Excessive taxation and regulations Lack of political consensus Low savings, consumption-oriented society Lower investment and tax collection Increased government borrowing Shrinking share in world trade Governance and implementation weaknesses Uncertainty due to lack of continuity of policies Prospects Development…
Pakistan is a land of vast potential and countless opportunities, of breathtaking landscapes and hospitable people, of rich traditions and unmatched resilience. Pakistan is now set to embark a new path of progress, peace and prosperity. ‘Emerging Pakistan’ is the narrative of a youthful and vibrant Pakistan; full of hope and passion; with abundant resources and opportunities; open to new ideas and ventures in the areas of manufacturing, human capital, natural resources, agriculture and communication. Manufacturing In 2016, BMI Research report named Pakistan as one of the ten emerging economies with a particular focus on of its manufacturing hub. Sialkot,…
In the wake of grey listing of Pakistan by the inter-governmental Paris based Financial Action Task Force (FATF), State Bank of Pakistan (SBP) has asked all foreign exchange companies to make sure their business is in compliance with the anti-money laundering rules and regulations. Exchange companies play an important role in facilitating remittances of overseas Pakistanis. Out of our total $19 billion plus annual remittances, up to 15-20 percent according to some estimates, comes through exchange companies. If these companies don’t become fully responsible in their conduct, Pakistanis settled abroad might stop using their services and switch over totally to…
The insurance industry in Pakistan is relatively small as compared to its peers in the region. The insurance penetration and density has remained very modest as compared to other countries. However, the situation has been improving over the last 5 years and the insurance industry, especially life insurance has shown tremendous growth. This growth can be attributed to the change in perception of life insurance which is now being perceived as security for prosperous future in the event of some unfortunate incident. Life insurance affects a country’s social and economic structure to a great extent. Due to its nature, life…
Challenges There are always lots of challenges for insurance industry in emerging markets. Most of the challenges are different with respect to the jurisdiction. Following are some major challenges insurance industry is facing in Pakistan: Awareness Skilled Human Resources Clear Rates Customers Access Political Pressure Economic Changes Halal and Haram conflicts Challenging Customer Behavior Inflation Effects Regular Growth Product Development Per Capita Income Technological Development Opportunities Low penetration and density shows that there is tremendous scope for expansion in insurance industry. Following are the opportunities an insurance company is likely to have in most of the conditions: Social Network Awareness…
Problem & context Remittances represent significant financial flows between both developing and developed countries that have rapidly increased in volume in recent years. The global sum of remittances currently equals three times of all official development aid worldwide, reaching over $700 billion in 2017. Migrant workers commonly use remittances to support their families; after going abroad for more-promising work opportunities, they send some of their earnings home. Families who are dependent on remittances from family members abroad are generally in a position of higher risk, and insurance is well suited to reducing the risk of lower-income families. Bancassuarance seeks to…
With its third edition underway in full swing, the Pakistan Super League has gained the status of a festival in the United Arab Emirates (UAE) and Pakistan after successful holding of two editions of the same earlier. On one hand, it helps portray a positive image of Pakistan abroad whereas on the other hand it is a big source of revenues for the Pakistan Cricket Board (PCB). At a time when no international cricket is being played at home since 2009, PSL came to our rescue in the form of a global cricketing product. It has gained the status of…
Pakistan is one of the fastest growing economies in the region and that is a good sign for the auto industry as well. Pakistan’s automobile industry is likely to double the annual car assembling to half a million units within the next 10 years if economic policies remain consistent and interest rate continues to bolster auto financing. The demand for four-wheel vehicles will rise from 0.28 million to 0.5 million in Pakistan within the next 12 years, according to a report by the Small and Medium Enterprises Development Authority (SMEDA). Moreover the China-Pakistan Economic Corridor (CPEC) will bring a lot…
Investments from China and other foreign companies likely to give boost to commercial truck and pickup sector. Pakistan is currently going through a transition phase in the automobile sector, with the approval of the latest Auto Policy 2016-2021. According to the policy, new investors can set up their production plants in Pakistan and boost import for less than half the normal price as an added perk. Automobile sales in Pakistan, including pick-ups and trucks, have remained strong in the last few years. Higher economic growth, improving security situation and higher bank financing have all contributed to supporting the sales of…
Natural gas is Pakistan’s primary source of energy and has committed to various pipeline and terminal projects for delivery to homes, industries and power plants. Gas makes up more than a half of the country’s energy source and it uses its natural production for domestic use, with imports of Liquefied Natural Gas (LNG) being considered to meet the supply gap. Natural gas caters for 37.68 percent of the country’s total energy supply, with a 40 percent increase in gas demand during the winter. Currently Pakistan has LNG of 4-5 million tonnes contracted and another 4-5 million within the current fiscal…
Issues Pakistan has currently two types of gas — imported and local. Textile, fertilizers, CNG stations and power sectors are using the Liquefied Natural Gas (LNG) under ring fencing regime. However, the domestic, commercial and some industrial players are using the domestic gas. But in future when the flow of imported gas volume in gas system increases, the two-tier gas pricing regime will not last and in that case one-tier gas pricing regime after mixing local and imported gases will not be applicable. The government is not clear on what kind of gas pricing regime should be in implemented in…
Pakistan was built on a dream, a desire, a vision that surpassed all bounds to become a glorious nation. It is a land of vast potential and countless opportunities, of breathtaking landscapes and hospitable people, of rich traditions and unmatched resilience. Pakistan is now set to embark a new path of progress, peace and prosperity. ‘Emerging Pakistan’ is the narrative of a youthful and vibrant Pakistan; full of hope and passion; with abundant resources and opportunities; open to new ideas and ventures under the themes of Opportunity, Sustainability & Mobility. Opportunity With the 10th largest labor force in the world,…
Developing an understanding about the nature and economic drivers of Pakistan is crucial to critical thinking about its impact on the economy. However, one needs to look at a more complete picture. The purpose of this article is to analyze the effects of investments in various avenues on the economic growth. Pakistan direly needs massive investment in energy and transport infrastructure projects to cut blackouts, boost growth and create jobs. There is no doubt that the country’s potential is under-utilized at the moment and in the near future, through devising right policies, Pakistan can emerge as one of the fastest…
Home remittances and money sent back by Pakistanis working abroad have financed the bulk of Pakistan’s trade deficit for the last many years. Remittance inflows, however substantial, continue to fall. Worker remittances have shown some unexpected improvement, and in the first 6 months of fiscal year 2018, increased by 8.72% from the same period in fiscal year 2017. If this rebound can be sustained for the rest of fiscal year 2018, it may ameliorate the external sector. As for year-end remittance numbers, the central bank expects full year FY18 remittance to range between $19.5 and $20.5 billion; the Planning Commission…
In order to reduce dependency on the greenback gradually over time, Pakistan has decided to use Chinese yuan for bilateral trade. The yuan attained the status of a global reserve currency, the third one after the US dollar and the euro, on Nov 30, 2016. For Pakistan, the rupee-yuan settlement of trade with China is important because it would reduce need for US dollars to a significant extent as Pakistani imports from China are in excess of $10 billion. Initially, even if 25 percent of our imports from China are to be financed in yuan, our dollar requirements would decline…
The financial services market is undergoing a lot of changes. Customers always have appetite for more and are well knowledgeable, looking for convenience and ease when it comes to financial services, particularly via internet and mobile phones making innovation and transformation two most powerful forces that are reshaping the banking industry. Customer expectations, technological capabilities, regulatory requirements, demographics and economics are some of the challenges that banks need to overcome in order to sharpen their tools for entering into the new era. Modern powerful tendencies are reshaping the banking industry. Social media and evolution of mobile technologies force retail banking…
As the technological landscape changes, so too does the expectation of consumers who shop in stores and online. Mobile technology, social networking and advanced analytics have aided in changing the shopping experience. It is no longer a question of whether or not consumers will migrate to online sales in greater numbers. For instance, regardless of whether or not they actually buy online, around 50 percent of consumers say they prefer to shop online. Age seems to make a difference as well – shoppers younger than 40 show the greatest likelihood of online shopping. One of the reasons more consumers are…
In today’s context e-commerce is a potent tool to further the goal of financial inclusion by drawing more people within the digital financial services space, irrespective of income and social status. Through simple payment and delivery options, innovative e-commerce solutions have the potential to transform the overall consumer shopping experience and positively influence customer behavior change particularly with regards to moving away from cash, thereby encouraging traditional brick-and-mortar retail shops to expand their electronic presence. With foundations well in place for digital commerce to flourish in Pakistan, it is only a matter of time before e-commerce takes the Pakistani consumer…
Pakistan is currently passing through a demographic transition, which has resulted in a ‘youth bulge’ (63% of our population comprising of youth, 69 million aged below 15) and an increase in the working-age population as a share of the total population. To reap the ‘demographic dividend’ of this change, the economy needs to provide education and create productive and remunerative employment for young workforce entrants. Foreign entrants such as Uber & Careem, through their entry, have acknowledged the economic potential of a nation with young population. Moreover, innovation through digitization and entrepreneurship are playing their part in human capital development.…
The OPEC and non-OPEC production cuts and the rising demand have been in play, which has lifted the crude oil prices to over $60 a barrel. This increase in crude oil prices will be celebrated by the oil and gas E&P companies around the world that have been investing in the low price – and hence low-cost era. Though prices are expected to rise in 2018, they are likely to set in a range of $60-70 per barrel. And while better oil price scenario has worked in the interest of these firms, the industry has also received another boost from…
Natural gas is one of the principal sources of energy in our economy. The past decade has witnessed substantial changes in the policy use of natural gas. Out of the box, unproductive and inefficient usage of natural gas has nearly exhausted our quantified conventional natural reserves. Paradigm changes in the development of technology have created the potential to recover more natural gas from shale formations, which can be used to meet our growing demand for energy and to sustain economic development. Shale gas is becoming increasingly important source of natural gas across the world with estimates of more than 15,000…
The government has failed to adopt what is normally termed ‘any marketing strategy’ to boost manpower exports with a view to enhance declining home remittances. On the other hand, India is on a rampant path to take over Pakistani manpower market in the Middle East for which Indian Prime Minister Narendra Modi visited United Arab Emirates (UAE), Saudi Arabia and Qatar last year and successfully achieved new workforce supply orders, no doubt, at the cost of Pakistan. India is said to have made inroads in Gulf Cooperation Countries (GCC) which had traditionally been Pakistani manpower market. Unfortunately, no attempt was…
Pakistan is currently passing through a demographic transition, which has resulted in a ‘youth bulge’ (63% of our population comprising of youth, 69 million aged below 15) and an increase in the working-age population as a share of the total population. To reap the ‘demographic dividend’ of this change, the economy needs to provide education and create productive and remunerative employment for young workforce entrants.Foreign entrants such as Uber and Careem, through their entry, have acknowledged the economic potential of a nation with young population. Moreover, innovation through digitization and entrepreneurship are playing their part in human capital development. Below…
Muslims will make up more than a quarter of the world’s population by 2030. The global Islamic market was worth over $3.6 trillion in 2013, and the market is projected to be worth over $5 trillion by 2020, according to reports published in the leading magazine. The Halal food market is projected to be worth $1.6 trillion by 2018. This sector is also estimated to be growing faster than the conventional food market, and could exceed 17% of the world food market by 2018. Halal’s burgeoning popularity can be linked to religious fervor; and beliefs that it’s cleaner, healthier and…
The country’s agricultural sector has three major roles in the national economy: provides food to consumers and fibre to the industry, earns foreign exchange, and provides a market for industrial goods/machinery. However, the share of agriculture in gross domestic product (GDP) has declined since independence, falling from 53 percent in 1949-50 to 19.8 percent in 2016-17. Pakistan has made significant progress in food production over the last several decades. However, food security is still a key challenge due to high population growth, rapid urbanization, low purchasing power, high price fluctuations, erratic food production, and inefficient food distribution systems. According to…
Highlights of 2017 8.5% growth in Large-Scale Manufacturing (LSM) Inflation rate of 3.9% Super strong growth in lending to the private sector 74.4% growth in Foreign Direct Investment (FDI) worth $939.7 million 19.5% growth in the Federal Board of Revenue (FBR) Tax Revenues and a double-digit growth in exports Considering the mixed trends in the macro-economy, which includes challenges and opportunities, GDP growth is expected to remain between 5-6 percent in 2018. The economy is expected to benefit from accommodative macroeconomic environment, activities related to the China-Pakistan Economic Corridor (CPEC) and constantly improving energy supply and security situation. Pakistan’s annual…
Microfinance Microfinance is just one tool in the war against poverty. For microfinance to be successful at poverty reduction, it must be used in conjunction with education, health and other social interventions. Microfinance becomes a multiplier force in such a scenario. Not only does it reduce poverty, it creates an even playing field by bringing the marginalized population into the banking net. The reality is that this customer-base pays an exorbitant price for the services that the banked population uses. The microfinance industry has been successful in opening mobile accounts, but has yet to make these accounts active. The microfinance…
Pakistan is, and has been, a highly consumption-oriented society. The much lower level of investment in Pakistan reflects, in large part, a much lower level of national savings. The ratio of gross investment to GDP has averaged 15percent since 2010 and is actually somewhat lower than it was in the previous four decades. In contrast, gross capital formation in India has risen very sharply and has been well above 30 percent of GDP during the last decade. Improving the security situation, more effective rule of law and better relations with its neighbors would greatly strengthen faith in the future of…
In the wake of widening external deficits, dwindling reserves and uncompetitive exports in the back drop of political uncertainty, the million-dollar question that arises is where to invest in 2018? Well, definitely not the Bitcoins, at least till the time it is recognized as a currency. While the economic managers are still busy understanding the sector-wise impact of the recent fall in the rupee’s value, meanwhile, investors keep themselves away from taking long-term positions in stocks. Even foreign investors, whom everyone expected to swoop in to pick up stocks in the event of rupee depreciation, have continued to keep their…
Review of banking industry In order to propel economic growth, the State Bank of Pakistan has recently identified three priority areas for extending loans — agriculture, SMEs and low-cost housing finance with focus on financial inclusion and Islamic banking. Right mix of agriculture sector policies can give an immediate push to growth. Although, the banks disbursed Rs700 billion in agriculture sector loans, the data shows that the production loans are even lower than the previous year’s level. Banks also have not done well in the SME sector, as in a span of just 10 years, the SME lending as percentage…
The strong rupee policy stance adopted by the government has caused grave damage to the economy. From managed float regime, it had become a fixed rate regime which caused drop in exports and remittances. The continuation of high growth in imports led to a widening of current account deficit, and consequently to depletion in the country’s foreign exchange reserves. Pakistan is facing major challenges of growing public debt, stagnation in exports, widening of the current account deficit, overvaluation of the nominal and real effective exchange rates, slowing down of growth in credit to the private sector, expansion of the informal…
After trading in the tight range of 104-105 per dollar since December 2015, the Rupee plunged to as low as 110 per dollar to settle around 108.40-50 per dollar. Economists and businesses have been urging the government to devalue the rupee, saying it was hurting exports and contributing to the depletion of Pakistan’s foreign currency reserves. A weaker rupee would help the economy grow and ease balance of payments pressures. The recent devaluation will help exportable products become competitive in the international market. The government had no choice as the trade deficit has crossed all limits. While on one hand,…
Among the seven Gulf Cooperation Council (GCC) countries, the UAE is the biggest investor in Pakistan. From 2004 to 2017, its public and private sector investments totaled more than $6 billion. Several key companies such as Emirates National Oil Company, International Petroleum Investment Company, Etisalat, Al Ghurair, Abraaj Capital, Dana Gas, Emirates Investment Group, Emaar, DP World, Julfar, Arabian Packaging Company and others have invested in Pakistan. Vast UAE foreign direct investment and joint ventures have been operating successfully in Pakistan for years. A large number of high-dividend FDI investment and joint venture opportunities exist in Pakistan. These include sectors…
Value Added Tax (VAT) is expected to be introduced at a rate of 5 percent with some limited exceptions including basic food items, healthcare and education. The UAE are planning to implement on 1st January 2018 — other Gulf Cooperation Council (GCC) countries may do so at the same time or by 1st January 2019 at the latest. The GCC member states are in the process of approving the long anticipated common framework for the introduction of a Value Added Tax (VAT) system in the GCC. The common VAT framework will form the basis for the introduction of a national…
[dropcap]P[/dropcap]akistan is a net oil importer and meets about 75 percent of needs through imports. Oil imports carry the heaviest weight in total imports of the country. Pakistan has a total refining capacity to process around 400,000 bpd or about 19MTPA of crude oil, against the current demand of 24MTPA. Total global refining capacity is 97 million bpd, and Pakistan, with nominal world share of 0.4 percent, is ranked 48th. Demand for oil products in the country is expected to grow steadily at seven percent on year-on-year basis, according to recent studies, in particular for the furnace oil, motor spirit,…
[dropcap]W[/dropcap]ith the affairs of Ministry of Finance now an open secret, the cat is finally out of the bag. The fresh statistics have exposed the cosmetic touches done to the economy causing concerns about long-term sustainability of the external sector. The current account deficit widened to US$ 5.0 billion during July-Oct FY18 as compared to $2.3 billion during the corresponding period in FY17. The good news is that Pakistan’s exports have seen an improvement during July-Oct FY18 growing at 11.3 percent as compared to the decline of 3.1 percent in the comparable period last year; and remittances have recorded a…