KARACHI: Boosted by infrastructure spending and several opportunities available in the power and transport sectors, Pakistan’s economy looks set for higher GDP growth with hope that it would finally be at a level where it can produce the additional jobs needed to cater to an increasing young population.
A relatively improved law-and-order situation and the China-Pakistan Economic Corridor (CPEC) - the single largest development plan Pakistan has ever seen - has instilled a sense of optimism among investors, bankers and public alike.
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While doubts remain amid worrying economic indicators, the sense of optimism is still greater than ever before.
“The message I get from within the bank, and outside, is the enthusiasm about the opportunities in Pakistan,” Bill Winters, global chief executive officer of Standard Chartered PLC, told a group of journalists recently. “I don’t get the same sense of optimism when I visit other countries, at least not consistently.”
Winters, who was on his first visit to Pakistan ever since he joined Standard Chartered in 2015, said the country, as a standalone market and in the global context, is becoming an increasingly important destination for investors with a compelling return to democracy and its economic recovery after it averted a balance of payments crisis in 2013 with a bailout from the International Monetary Fund (IMF).
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“Pakistan is a large market, managing its transition to the democratic form of government in a compelling way. As each election goes by smoothly, it is encouraging. It has a highly educated and talented labour force. So when you hear that story, one wonders how would you not want to invest in Pakistan?
“But it is not a straight line. In Pakistan’s case as well, there have been ups and downs. However, it has a very positive trend line.”
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Standard Chartered Pakistan registered a profit of Rs9.62 billion in 2016, translating to earnings per share of Rs2.48, up from Rs2.4 in 2015. With a growing balance sheet and a deposit base of Rs365.6 billion at the end of December 2016, Winters said the bank can serve as the bridge international investors need to cross into Pakistan as CPEC projects move ahead at greater speed. While it is likely to face immense competition from some of the local banks with market talk suggesting HBL as the prime beneficiary among Pakistani players due to its Rs1.9-trillion deposit base and wider branch network, Winters said his bank’s international client base puts it in good stead.
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“We work closely with Chinese banks and many of the companies there. If I can, boldly, say we are the leading bank in (Beijing’s) One Belt One Road initiative (of which CPEC is a part).
“Many investors in the US and developed markets feel there is an investment opportunity in Pakistan - including the MNC clients in North America and Europe - around the CPEC initiative. They say they have missed the main game because the Chinese have stolen the march, but there is still much more left.”
However, concerns remain over the sustainability in Pakistan’s economic recovery.
Near-stagnant growth in remittances, drastically falling exports and lower foreign direct investment have worried the country’s economic managers. With the import bill set to remain high as Pakistan imports CPEC-related machinery, many are worried if the country is heading for another IMF bailout. As the current account deficit widens further, many believe history is likely to repeat itself.
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“Clearly, we need to ensure Pakistan’s exports go back to the growth mode,” added Shazad Dada, chief executive officer of Standard Chartered Bank Pakistan. “There are certain external factors as well - oil prices, for example. Remittances are flat due to pressure on the Gulf countries. For now, we are comfortable with the position, but it is something we are monitoring closely.”
Meanwhile, Winters said the lack of a “flood of money is not discouraging”.
“Pakistan has seen three years of good, solid economic growth. You are building a base for a period when really extensive FDI can follow.”
Published in The Express Tribune, March 25th, 2017.
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