New Business Opportunities in Pakistan

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New Business Opportunities in Pakistan NEW BUSINESS OPPORTUNITIES IN PAKISTAN NEW BUSINESS OPPORTUNITIES IN PAKISTAN AN INVESTOR’S GUIDEBOOK Consultants and authors of this report: Philippe Guitard Shahid Ahmed Khan Derk Bienen This report has been produced with the assistance of the European Union under the Asia-Invest programme. The views expressed herein are those of the consultant and can therefore in no way be taken to reflect the views of the European Union. New Business Opportunities in Pakistan TABLE OF CONTENTS LIST OF TABLES ................................................................................................................................. VIII LIST OF FIGURES .................................................................................................................................. X LIST OF BOXES..................................................................................................................................... XI LIST OF ACRONYMS ........................................................................................................................... XII INTRODUCTION ..................................................................................................................................... 1 EXECUTIVE SUMMARY......................................................................................................................... 2 PART I: PAKISTAN GENERAL INFORMATION ................................................................................... 8 MAP OF THE COUNTRY........................................................................................................................ 8 PAKISTAN AT A GLANCE ...................................................................................................................... 9 1 GENERAL COUNTRY INFORMATION ...................................................................................... 12 1.1 General environment..........................................................................................................12 1.1.1 Population............................................................................................................ 12 1.1.2 Geography ........................................................................................................... 12 1.1.3 Climate................................................................................................................. 13 1.2 History ................................................................................................................................13 1.3 Political environment..........................................................................................................14 1.4 Foreign affairs ....................................................................................................................15 1.5 Human resources and social environment.........................................................................16 1.5.1 Social infrastructure............................................................................................. 16 1.5.2 Social security...................................................................................................... 16 1.5.3 Education............................................................................................................. 16 1.6 Cultural environment..........................................................................................................17 1.6.1 Languages ........................................................................................................... 17 1.6.2 Nationalities ......................................................................................................... 17 1.6.3 Religion................................................................................................................ 17 1.6.4 Values.................................................................................................................. 18 1.7 Physical infrastructure........................................................................................................18 1.7.1 Road network....................................................................................................... 18 1.7.2 Railway network................................................................................................... 18 1.7.3 Ports..................................................................................................................... 19 1.7.4 Airport and international links .............................................................................. 19 1.7.5 Energy.................................................................................................................. 19 1.7.6 Telecommunications............................................................................................ 20 2 ECONOMIC OUTLOOK.............................................................................................................. 21 2.1 Economic structure ............................................................................................................21 2.1.1 Agriculture............................................................................................................ 21 2.1.2 Manufacturing ...................................................................................................... 22 2.1.3 Services ............................................................................................................... 23 2.2 Economic reforms and policies ..........................................................................................24 2.2.1 Budget and fiscal reform...................................................................................... 25 2.2.2 Liberalisation and privatisation ............................................................................ 26 2.2.3 Financial sector reform ........................................................................................ 27 2.3 Short and medium-term economic performance ...............................................................29 Page i New Business Opportunities in Pakistan 2.3.1 Economic growth trends ...................................................................................... 29 2.3.2 Inflation ................................................................................................................ 30 2.3.3 Employment......................................................................................................... 31 2.4 Foreign trade......................................................................................................................32 2.4.1 Structure .............................................................................................................. 32 2.4.2 Foreign trade policy: recent developments.......................................................... 35 2.4.3 Trade balance...................................................................................................... 36 2.4.4 Trade with EU countries ...................................................................................... 36 2.4.5 WTO issues and developments........................................................................... 38 2.4.6 Regional integration............................................................................................. 40 2.5 Balance of payments and exchange rate ..........................................................................43 2.6 Public finance and debt......................................................................................................44 2.7 Foreign investment.............................................................................................................45 2.7.1 FDI flows and portfolio investment ...................................................................... 45 2.7.2 Structure of the FDI flows and stock per country of origin................................... 46 2.7.3 Structure of FDI flows and stock per sector of investment .................................. 47 2.7.4 Activities of EU enterprises in Pakistan, a success story .................................... 48 2.7.5 Profitability ........................................................................................................... 48 2.8 Investment climate and sector policies ..............................................................................49 2.9 Investor perceptions...........................................................................................................51 2.10 Country risk assessment....................................................................................................51 2.10.1 Moody’s Investor Service..................................................................................... 52 2.10.2 Standard & Poor’s................................................................................................ 52 2.10.3 Export Credit Agencies........................................................................................ 52 2.10.4 Bretton Woods institutions................................................................................... 53 3 BUSINESS ENVIRONMENT....................................................................................................... 55 3.1 Legal framework.................................................................................................................55 3.2 Business regulations..........................................................................................................56
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