Hello again, Ray,
Thanks for getting back to me. I've provided a detailed answer below,
but also kept the focus general, so as to be applicable to all
business sectors. I put it together quickly -- so you'll have time to
review and attend to your report -- but I'm always here if you need
any additional information.
Some of the information I've provided is specific to companies in the
US that may be considering doing business in Pakistan, but most of the
information will serve your needs whether you are based in the US or
not.
I trust this information will fully meet you needs. However, please
do not rate this answer until you are fully satisfied with it. If you
have any questions, or need any additional information, just let me
know by posting a request for Clarification, and I'll be happy to
assist you further.
All the best,
pafalafa-ga
==========
Here is a summary of the pros and cons of doing business in Pakistan,
followed by more detailed information:
On the plus side:
--Pakistan is modernizing in many areas, and its economy is expanding
rapidly, with GDP growth of more than 5% per year
--Currency has been stable in recent years
--Economic reform appears to have solidy taken hold, with deregulation
and privitization occuring in many sectors
--The financial sector, in particular, is modernizing rapidly
--Private secto credit has grown
--Foreign investment is strongly encouraged
--OPIC support is potentially available to US firms
On the negative side:
--Security remains a major concern, with foreigners -- particularly
westerners -- possibly at the greatest risk
--Democratic government has not yet taken root, and political
instability remains a real concern
--infrastructure is generally poor, though modernizing rapidly in some
areas such as internet access
--the legal and regulatory structure can be complex and capricious
--corruption is rampant, intellectual property rights and the sanctity
of contracts are not well respected
--there remains a perception that -- however encouraging the
government is towards private investment -- there is a possibility of
returning to past approaches of not welcoming new investment, and
nationalizing existing investments
==========
The best source of information on market conditions in Pakistan turns
out to be the US government. The Department of Commerce regularly
prepares very detailed, vey excellent reports that are highly valued
for their insights into the business climate of a given country. Best
of all, the reports are available at no charge. Even if you are not
presently operating in the US, the reports still offer a great deal of
valuable information.
To retrieve the full reports, head to:
http://www.export.gov/comm_svc/
The United States Commercial Service
and note the link that says: "world-class market research".
Clicking on this will take you to:
http://www.buyusainfo.net/adsearch.cfm?search_type=int&loadnav=no
Market Research Library
where there are a large series of pull-down menus, but only one of
these is of interest to us right now....the "Country" menu. Select
"Pakistan", and you'll be taken to:
http://www.buyusainfo.net/body.cfm?dbf=&search_type2=int&country=Pakistan&logic=and&loadnav=no
Pakistan
Records Found: 610
In other words, there are 610 Pakistan reports to choose from!
Frankly, the majority of these are somewhat out-of-date, but the more
recent reports are terrific resources.
The absolute best overall report is the Pakistan Country Commercial
Guide for 2004 (on the right hand side of the page). Clicking on the
link to the full report, which looks like this:
Pakistan Country Commercial Guide: FY 2004
(Entire CCG - 00)
will open up a goldmine of information:
READ THIS REPORT, top to bottom, and you should have pretty much all
the information you need, as well as contact information should you
need additional information.
If you have trouble accessing the report for any reason, let me know,
and we'll work out a means of alternative access.
Here are some key excerpts to get you started, all taken directly from the report:
From the Executive Summary:
---Pakistan's economic performance in fiscal 2003 (the year ending
June 30, 2003) was impressively strong. With GDP growth of 5.1%, low
levels of inflation, burgeoning reserves (over 11 months import
cover), a stable currency and declining deficits; Pakistan is reaping
the fruit of four years of stringent macro-economic adjustment
--The government has tackled some of the most difficult economic
reform issues, including Pakistan's massive debt overhang,
thoughtfully and credibly.
--Pricing has been broadly deregulated, including in the energy
sector, and import tariffs rationalized and broadly reduced.
--The central bank has been granted unprecedented autonomy and capital
market prudential oversight has been strengthened.
--The administration...has focused on better governance and has
pledged to maintain an open and welcoming investment climate.
--However, the prevailing domestic law and order situation remains challenging...
...a lack of judicial transparency and a lack of respect for
Pakistan's WTO intellectual property right commitments has been
detrimental to foreign investment in Pakistan.
--Pakistan's democratic institutions remain weak
--The process of privatizing major state-owned enterprises remains slow
--Pakistan tax collection/GDP ratio remains stubbornly low
--Most disturbingly, Pakistan's poverty indices have climbed over the
last 3 years from 30% to 32%, with a significantly higher incidence of
poverty in rural areas.
--The American business community is a significant presence in
Pakistan, with investments totaling over $1 billion in the energy,
pharmaceutical, IT and financial services sectors.
--U.S. companies here employ over 20,000 Pakistanis
--United States remains Pakistan' single largest trading partner
--Pakistan has made considerable advancement in the information
technology (IT) sector.
--A key element of Pakistan's IT policy is the supply of cheap
bandwidth capacity and availability of internet access in all parts of
the country.
--...the telecommunication sector is poised for major growth during
the next 3 to 5 years. The cellular market is also expected to grow
quickly.
--The government has announced a package of incentives to promote
offshore exploration for oil and gas.
--Principal competitors of U.S. businesses in Pakistan are European,
Japanese, South Korean and Chinese firms.
--Pakistan is a diverse and challenging market requiring adaptability
and persistence. Careful planning and patience are the prerequisites
for success in this emerging market. U.S. firms that are willing to
invest time to develop market presence should expect to be rewarded in
the long-term.
CHAPTER 2: ECONOMIC TENDS AND OUTLOOK
--Various problems have plagued Pakistan's progress...Domestic
political instability and sporadic ethnic and sectarian violence
remain a problem along with the influx of million Afghan
refugees....Policy inconsistency, weak implementation and corruption
have dampened investor interest and economic growth in Pakistan.
--Agriculture is the dominant sector of the economy and accounts for
around 24 percent of Gross Domestic Product
--Pakistan, which had almost no large industrial units at the time of
Partition in 1947, now has a fairly broad industrial base, and
manufacturing accounts for about 18 percent of GDP.
--Decline in average lending rates coupled with improvement in
economic activity resulted in a significant increase in credit to the
private sector.
--Privatization of many state-owned enterprises is another key element
of Pakistan's reform program. Despite government's strong commitment,
the privatization has been slow and hampered by limited investor
interest due to regional tensions and weak global economic
environment.
CHAPTER 3: POLITICAL ENVIRONMENT
--As in many developing countries, corruption is an unwelcome, but
ubiquitous, part of the business climate in Pakistan.
--Democracy has not yet taken root in Pakistan.
CHAPTER 4: MARKETING US PRODUCTS AND SERVICES
--The three principal routes to entering the Pakistan market are: (1)
formation of a wholly-owned private company; (2) formation of a public
limited company (foreign firm retains majority control, but seeks
public participation through stock flotation); and (3) establishment
of a company in cooperation with joint venture partners, who supply
local expertise, management, and capital.
--A business in Pakistan may be organized as a sole proprietorship, a
partnership, or as a public or private limited company. Foreign
investors generally establish limited companies as required under the
Companies Ordinance, 1984. They must register with the Securities and
Exchange Commission (SEC).
--All manufacturing concerns employing more than 10 persons are
required to register with the appropriate provincial Chief Inspector
of Industries under the Factories Ordinance, 1984.
--Companies are also required to register with the concerned income
tax department and obtain a National Tax Number (NTN).
--Need for a Local Attorney: For multinational corporations
considering capital or industrial investments in Pakistan, local legal
counsel may provide useful insights into the local laws and business
environment, identification of the appropriate business structure
(such as a liaison office, a branch office or a wholly-owned
subsidiary), and advice and assistance in drafting appropriate
agreements and complying with local regulatory requirements.
CHAPTER 7: INVESTMENT CLIMATE STATEMENT
--Pakistan actively seeks foreign investment.
--Notwithstanding this pro-investment stance, foreign direct
investment (FDI) activity remains relatively modest.
--Reasons for low FDI inflows include significant security threats to
foreign interests in Pakistan; concerns about political instability;
inadequate infrastructure; delays in the privatization of state-owned
enterprises; past protracted disputes between foreign investors and
the government; piracy of intellectual property, arbitrary and
non-transparent application of government regulations; and resistance
to the adoption of new policies by some elements of federal and
provincial bureaucracies who have not yet fully adjusted to the new,
more open economic environment.
--There is a need for continuity in economic policy, enhanced legal
protection for foreign investment and a clear and consistent policy of
upholding the sanctity of contracts.
--Foreign investors in Pakistan have complained of being subject to a
confusing array of federal and provincial taxes and controls. Their
application -- with considerable administrative discretion -- has been
a source of inefficiency and corruption.
--In the past, a significant hurdle to investment in Pakistan has been
the bewildering series of approvals, permits, and licenses required
from various levels of government prior to launching a project. A
series of government agencies, most recently the Board of Investment,
have been created in an attempt to ease this burden by providing a
one-stop interface between investors and relevant Pakistani
authorities.
--Pakistan has a liberal foreign exchange regime with few restrictions
on holding and transferring foreign exchange.
--For new investment, a 50% first year depreciation allowance for
plant, machinery and equipment can be used to offset taxable income.
Unutilized allowances can be carried forward to subsequent years. An
investment tax credit of up to 50% of the cost of plant, machinery and
equipment is available to encourage plant expansion and modernization.
--Foreign and domestic investors are free to establish and own
business enterprises in all sectors of the economy with the exception
of four restricted sectors: Arms & munitions, high explosives,
currency/mint operations, and radioactive substances. Private entities
are similarly free to acquire and dispose of their interests in
business enterprises.
--Pakistan's legal system offers improving, yet incomplete, protection
for the acquisition and disposition of property rights.
--...the Office of the U.S. Trade Representative has placed Pakistan
on the Special Section 301 Watch List under the Trade Act of 1988 for
the past several years because of inadequate intellectual property
rights protection.
--Projects likely to have adverse environmental impact are required to
file detailed Environmental Impact Statements
--Pakistan's financial sector policies support the free flow of
resources in product and factor markets for domestic and foreign
investors. The central bank (State Bank of Pakistan - SBP) and the
Securities and Exchange Commission (SECP) continue to progressively
expand and fine-tune their prudential regulation and oversight of
financial and capital markets with the assistance of the IMF, World
Bank and Asian Development Bank.
--There are significant threats to foreign interests in Pakistan, both
from al-Qaida and Taliban remnants and from domestic terrorist
organizations. The U.S. Embassy is operating on reduced staffing with
no non-working dependents at post; most other Western diplomatic
missions have reduced staff levels. All major Western countries,
including the United States, have issued travel advisories
recommending against non-essential travel to Pakistan.
--The Government of Pakistan has taken significant steps to curb the
terrorist threat, including banning eight extremist organizations and
placing extra police protection on diplomatic missions, hotels that
cater to international guests, and similar locations. Despite these
measures, the threat to Western diplomats, executives and tourists in
Pakistan is likely to remain high for at least the medium term. Most
Western businesses operating in Pakistan will require extra security
measures and should budget accordingly.
--Corruption remains widespread in Pakistan, especially in the areas
of government procurement, international contracts, and the taxation
system. Pakistan's ranking in Transparency International's corruption
index improved from 99 in 2002 to 92 in 2003 out of total of 133
countries listed.
--Overseas Private Investment Corporation (OPIC) insurance and
financing facility became available for commercial transactions
involving Pakistan. Projects must meet OPIC eligibility guidelines.
--Pakistan's banking sector offers a full range of services, including
foreign trade and working capital financing, term finance facilities,
and retail banking.
==========
As you'll see, there's a great deal more in the report, much of it
specific to individual sectors such as telecommunications, or textile
manufacturing. You'll have to select the information most relevant
to your interest.
There's also information in the report about steps that Pakistan
should/could take to improve its foreign investment climate -- I've
included a number of these in the extracts, above.
Note, too, that the last sections of the report contain a great many
contacts of people and organizations in the US and in Pakistan that
can offer assistance should your company choose to go forward in this
area.
Again, let me know if you need any additional information.
pafalafa-ga
search strategy: Used bookmarked links for Country Market reports. |
