Despite rising economy, Pakistan still hampered by image problem

Published: June 20, 2016
Customers dine at outdoor restaurants at Kohsar Market in Islamabad, Pakistan, June 18, 2016. PHOTO: REUTERS

Customers dine at outdoor restaurants at Kohsar Market in Islamabad, Pakistan, June 18, 2016. PHOTO: REUTERS

KARACHI/ISLAMABAD: Pakistani stocks are soaring, improved security is fuelling economic growth and the South Asian nation will be upgraded to “emerging market” status by index provider MSCI.

But for Ali Saigol, co-founder of a private equity firm, convincing foreign investors to overlook the country’s violent past and bet on its economy remains a hard sell. He said pitches often encountered thesame problem: Pakistan’s image.

After a turbulent decade in which militants staged frequent gun and bomb attacks on cities, some investors still refuse to visit Pakistan and insist on meeting Saigol in Dubai.

Pakistan upgraded to emerging markets status

“Most people have never been to Pakistan. It’s a huge problem,” said Saigol, sipping a cappuccino in an upscale cafe in Islamabad, Pakistan’s leafy, affluent capital.

“When people visit Pakistan, they see it’s actually opposite of what they expect.”

Saigol’s frustration goes to the heart of Pakistan’s struggle to attract foreign investment and boost economic growth from 4.7 per cent towards above 6 per cent, the minimum level experts say is needed to absorb new entrants into the job market in a nation of 190 million people.

Pakistan’s $250 billion economy is growing at the fastest pace in eight years but only attracted $1 billion in foreign direct investment (FDI) in the nine months to April. FDI inflows into Indonesia, by comparison, hit $29 billion last year.

Many businesses in Pakistan have flourished since 2014, when a military offensive against militant groups improved security.

Violence is down overall, although deadly attacks are not uncommon. In late March, more than 60 mostly women and children were killed by a suicide bomber in Lahore.

In major cities, car sales are rising and shopping malls are sprouting to cater for an expanding middle class.

A crime crackdown in Karachi, Pakistan’s financial hub of 20 million people, has helped spur a real estate boom and new, upmarket seaside restaurants and cafes are overflowing.

Perceptions take time to change

The progress is in stark contrast to economic instability during the past decade, when the stock market collapsed and Pakistani Taliban militants held territory 100km from Islamabad.

MSCI reclassification: Has the stock exchange become more vulnerable?

The militants have since been contained in small pockets in mountainous areas near the Afghan border and the country’s stock market is Asia’s best performing index in 2016.

“Perceptions change with a lag. Our reality has changed, but it takes a little while for investors to realize that,” said Miftah Ismail, an adviser to the prime minister tasked with bringing foreign investment into Pakistan.

Ismail said he had expected more money to flow from abroad by now, and concedes investors need convincing that Pakistan “will not revert to type” by running large deficits and facing foreign exchange crises.

Investors will also have to be convinced that political risks are easing in a nuclear-armed nation surrounded by countries with whom it has unstable relations, including arch-foe India.

Yet there are tentative signs foreign companies are eyeing Pakistan’s fast-growing consumer market.

Carmakers Renault-Nissan are considering a plant in Pakistan, and Suzuki, which already has a presence, said it may invest $460 million for a new factory.

A Dutch dairy cooperative, FrieslandCampina International Holding, in March announced plans to buy a stake in Pakistani food giant Engro Foods, in a deal estimated at $460 million.

Indicators “flashing green”

Omar Hamid, head of Asia Pacific country risk research for IHS, said interest in Pakistan has soared this year by IHS corporate clients seeking country and political risk analysis.

“It’s a massive consumer market and the economic indicators are flashing green for many international companies,” he said.

Pakistan’s interest rates are at 42-year lows, inflation has been tamed at about 3 per cent, the currency is stable and foreign exchange reserves have jumped to all-time highs.

The economy is also expected to receive a shot in the arm from the China-Pakistan Economic Corridor (CPEC), a $46 billion roads and energy project.

‘Pakistan to receive up to $500 million post MSCI re-classification’

Much of the money is earmarked for power stations to ease chronic electricity shortages which hobble business and investment.

Prime Minister Nawaz Sharif’s government is so confident about the economy that it plans to end the IMF’s $6.7 billion financial assistance program in September. Analysts say this could prove a risky move if oil prices spike.

In Karachi, the business community hopes MSCI’s upgrade of Pakistan will herald a return of foreign investors who fled in anger in 2008 when the bourse imposed a floor and trapped them in a collapsing market for three months.

“What happen in 2008 could never happen again,” said Haroon Askari, deputy director of the Pakistan Stock Exchange.

Pakistan’s main benchmark index has risen more than 500 per cent since the start of 2009, but is still considered cheap by some, trading at multiples below other emerging markets due to political and security risks associated with Pakistan.

Saigol, founding partner of Baltoro Capital, which manages a new $48.5 million private equity fund, said foreign investors who finally take a serious look at Pakistan are often surprised.

“They say they have never seen a country or an economy the size of Pakistan with so little coverage, so under the radar.”

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Reader Comments (23)

  • Shuaib
    Jun 20, 2016 - 11:16AM

    The media should start being fair to PMLN. PMLN has stabilised our macro economy. Also chicken is Rs. 60 cheaper per kg than pulses, it is a very good sign for an econony.Recommend

  • Reader
    Jun 20, 2016 - 11:35AM

    Hope security establishment will keep aggressive posture towards any submersive activities & Pakistan image to improve in coming daysRecommend

  • Faisal
    Jun 20, 2016 - 11:45AM

    Proud of PMLN, they have taken Pakistan to a new level. Look it today and compare it to Pakistan decade before, improved security, improved economy, improved infrastructure, better business environment. Still there are people who want to derail the current system. PMLN surely deserves an another term, to take Pakistan to another level. Thanks.


  • Raju
    Jun 20, 2016 - 11:45AM

    PTI trolls should accept the reality that PML-N is a best government Pak got in last one decade or so, and they are performing really well on economic grounds. Lets complete them a 5 years term and I am sure there will be huge improvement in economy and security. Recommend

  • wiserneighbour
    Jun 20, 2016 - 11:46AM

    By harbouring international terrorists or in Pakistani parlance “strategic assets”, what the world think about you is not a matters of concern for your deep state.Recommend

  • Haji Atiya
    Jun 20, 2016 - 12:13PM

    I’ll believe it when I see it ! When I see the value of PKR vis-a-vis all the major currencies strengthening then I will gain some modicum of belief… When I’ll see a major diversification of our exports from one of being low-value added commodity driven to a high-value added knowledge-intensive one, then I’ll believe it.. When I’ll see a major increase in FDIs from a variety of countries, and not just China, then I’ll believe it.. When I’ll see the end to loadshedding, and not just the usual 6 month turnover of empty promises from not the politicians, then I’ll believe it.. But most of all, when I see rule of law apply to the rich and poor equally, then perhaps you’ll believe it too.Recommend

  • Laura Khan
    Jun 20, 2016 - 12:50PM

    The “image” is REAL. The world knows Pakistan for what it truly is- a sick, twisted and demented society. Accept it … fix it! Recommend

  • pakistani bloach
    Jun 20, 2016 - 12:58PM

    @shuaib. Stop this chicken vs pulses nonsense. one kg of pulse can last a week for a poor family of six but one kg of chicken will last only a meal or two.Recommend

  • Someone
    Jun 20, 2016 - 1:33PM

    Even India has terrorists and exports strategic assets, that doesn’t hamper economic growth.Recommend

  • yes
    Jun 20, 2016 - 2:15PM

    As an ex critic of pmln, i hereby concede that they have won my praise. I will vote for pmln next time. Recommend

  • Shakil Ahmed
    Jun 20, 2016 - 3:09PM

    The real issue, Pakistan has left its image building to others and the others are not very kind!
    Pakistan has absolutely no international media outlet that is addressed to international audience. Every major country on this planet has its one or more english and other language contents that portray and market Pakistan.

    A concerted effort is required by government and Pakistani flourishing media to look beyond Pakistan for its viewers.

    Lack of Pakistani journalists in international media doesnt help, as a result every tom and harry becomes expert on Pakistan that has never stepped in Pakistan. Make a coordinated effort to send mass communication toppers from good Universities to international universities to train and they can work in international media outlets as Pakistan subject matter experts.Recommend

  • Rahul
    Jun 20, 2016 - 5:35PM

    Pakistan’s real problem is ideology, not image. Image can be fixed, ideology runs deeper. 70 years of existence has shown that the ideology will surface again and again and military campaigns cannot fix it.Recommend

  • Kickass
    Jun 20, 2016 - 5:39PM

    With modern media and technology it is not possible for such people to be ignorant of reality. They are being over foolish by taking us as fools. The world embassies and staff are very much here and they do travel. This is a western in fact US policy to somehow isolate our nuclear capability. No wonder Indian Prime Minister is being wooed by inept policymakers accross the Atlantic. So Mr Saigol don’t act like a dummy. Make them understand that we know their problem.Recommend

  • raider
    Jun 20, 2016 - 7:16PM

    they are dancing on low oil prices, you did not see decreased fdi and exports, and lowest GDP IN SOUTH ASIA, actually gdp is 3.1 if fudged figures are not included.Recommend

  • Anwaar Ul Haq
    Jun 20, 2016 - 9:14PM

    Come on, still relaying on PMLN, have u forgotten their past and recent scam.
    Indeed, chicken is cheaper than pulses but all dairy products business belongs to Hamza Shehbaaz, deliberately they are making things expensive to increase the sale of chicken. Once pulses were cheapest commodity to use but now no more.
    Come on, think in right direction. Recommend

  • leela4fun
    Jun 20, 2016 - 10:10PM

    It is not an image problem. It is a debt problem. Basically borrowing money to pay the interest on previously borrowed money. This smoke and mirrors cannot go on for long.Recommend

  • numbersnumbers
    Jun 21, 2016 - 1:05AM

    Note that @Someone: somehow conveniently neglected to identify those “Strategic Assets” that he claims India “exports”! Recommend

  • Anon
    Jun 21, 2016 - 2:10AM

    Ruling class wanna fool people with this fake emerging economy bubble….
    but, if you see the ground reality, even Bangladesh is economically way ahead of Pakistan, Bangladesh’s growth rate, exports and forex reserves are much higher than Pakistan’s growth rate, exports and forex reservesRecommend

  • Sumi
    Jun 21, 2016 - 2:12AM

    Pak gdp is 250 billion?
    India’s one state Maharashtra’s GDP is higher than Pak’s GDPRecommend

  • XoF
    Jun 21, 2016 - 2:35AM


    Well we love this ideology of being independent from Indian rule. Let it thrive be it civilian or military. Pakistan is here for this ideology.Recommend

  • Rizwan
    Jun 21, 2016 - 3:56AM

    @Laura Khan:
    West is equally responsible for this state of affairs.They have always supported dictators in Pakistan. Bad governance always leads to chaos. Failure to resolve the Kashmir dispute for decades is also another factor that gave rise to armed militias.Recommend

  • Sajida
    Jun 21, 2016 - 7:17AM

    Since there is such high tax evasion, Pakistanis have plenty of money to invest in their own country.Recommend

  • Adnan Latif
    Jun 21, 2016 - 4:55PM

    The elite in Karachi and Lahore are sipping cappucino while in the countryside the masses labor in utter misery. And you call this an economic boom.Recommend

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