Pakistan Business Overview

Business and Economic Overview

Pakistan’s real GDP has continued to grow in recent years by steadily increasing amounts, and is forecast to level at around 5.5-6% growth annually over the next four years. Inflation is also forecast to remain steady, albeit, moderately high at 5% over the same time period. However, the economy is lacking diversity, as almost 80% of Pakistan’s export economy is based upon the textiles and agricultural industries. As exports have decreased annually, imports have increased with machinery, chemicals and mineral products, predominantly petroleum, forming over 50% of imports.

There are major obstacles to doing business in and with Pakistan, most notably the poor security situation owing to domestic sectarian and ethnic unrest as well as terrorism. A lack of bureaucratic transparency, deeply rooted corruption and lack of intellectual property right enforcement all provide further challenges, whilst the weak infrastructure and energy crisis are significant obstacles.[1]

As such Pakistan is ranked 142 of 190 in the World Bank’s Starting a Business index and 147 in the Ease of Doing Business Index.[2]

Nevertheless, Pakistan encourages foreign investment and permits wholly-foreign owned subsidiaries in all sectors of the economy, with full rights of repatriation for capital and dividends.[3]

Pakistan also has a large, growing middle class, whilst maintaining an educated workforce combined with low labour and production costs.

Anglophone nations also share a common business language, similar legal practices and Pakistanis have a strong familiarity with western companies and brands.[4]

Notable opportunities exist in the construction sector where demand for housing is upward of 6.5million per annum and there are a number of infrastructure contracts under the enormous China-Pakistan Economic Corridor scheme.

Oil, gas and mineral equipment and extraction is also a best prospect sector as Pakistan is actively seeking investment in onshore and offshore exploration activities, and the construction and development of explored resource locations.[5]

There are also vast untapped coal reserves in the Thar Desert which Pakistan seeks to exploit as it looks to solve its energy crisis.

Security Overview

Pakistan faces a number of security issues. A number of terrorist groups operate in and out of Pakistan, particularly in the Federally Administered Tribal Areas and Khyber Pakhtunkhwa, such as the Tehrik-i-Taliban.

Attacks can occur anywhere, targeting tourists, the government, state security forces and civilians through a variety of methods such as shootings, suicide bombings and vehicle-borne improvised explosive devices. Terrorist groups are also active in Balochistan and Azad Kashmir, where they regular cross the Line of Control (LoC) into Jammu and Kashmir.

Balochistan also has an active separatist movement, whilst Indian and Pakistani military forces may exchange fire across the LoC at any time, and a threat of armed conflict still remains.[6]

There is also a high threat of both petty and violent crime, especially in urban areas, and western nationals are often targeted for their perceived wealth. There is also a high risk of kidnapping across the country, both in urban areas such as Karachi and rural areas, such as in Sindh and Balochistan.

The threat of piracy within Pakistan’s territorial waters is low, but in the wider Indian Ocean and Arabian Sea piracy continues to pose a threat. [7]

[1] https://www.gov.uk/government/publications/exporting-to-pakistan/doing-business-in-pakistan-pakistan-trade-and-export-guide.

[2] http://www.doingbusiness.org/data/exploreeconomies/pakistan.

[3]https://www.state.gov/e/eb/rls/othr/ics/investmentclimatestatements/index.htm#wrapper.

[4] https://www.gov.uk/government/publications/exporting-to-pakistan/doing-business-in-pakistan-pakistan-trade-and-export-guide.

[5] https://www.export.gov/article?id=Pakistan-Construction-Equipment-and-Services; https://www.export.gov/article?id=Pakistan-Oil-and-Gas-Equipment.

[6] https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Pakistan.html.

[7] https://www.gov.uk/foreign-travel-advice/pakistan/safety-and-security.