Are global investors, particularly those who missed pouring money into the India of 2003, tempted to bet on Pakistan? Despite its reputation as a failed state and a breeding ground of Islamist terror, the country may be on the radar of investors hunting for an economy poised for long-term growth.
With a return of over 50%, the Pakistan Stock Exchange benchmark index was the best performer in Asia last year, hitting a record in January. Besides growth in corporate profit, disposable income, loan demand and power generation, factors working in favour of the troubled nation are its links with China, as evidenced by the much-touted $50-billion China Pakistan Economic Corridor (CPEC); the ruling government scrambling to fulfil its promised power sector reforms ahead of elections next year; and the emergence of the middle-class consumer.
The World Bank has forecast the economy to grow 5.2% this year and 5.5% next year. “A GDP growth of 5% even with negative contribution from agriculture makes a good case of GDP to grow more than 5% in the coming year,” said Mattias Martinsson, CEO of Sweden-based Tundra Fonder, a Pakistan-dedicated equity fund managing $150 million.
What’s also exciting investors is a surge in auto sales, offtake in cement, rise in property prices, benign inflation and lower interest rates. “Last 30 years Pakistan has suffered due to violence and terrorism that cost its economy $20 billion,” said Amin Hashwani, former president of the Pakistan-India CEOs Business Forum. “Today, a comparatively better security environment, heavy investment related to CPEC, increased domestic investment and enhanced overseas remittances have triggered growth.”
Consumer spending in Pakistan has increased 83% in the past five years compared with 49% in the Asia-Pacific region, according to Euromonitor International, a consumer research firm. Its forecasts show Pakistan’s disposable income has more than doubled in six years.
Nestle Pakistan’s revenue has grown at a compounded annual growth rate of 15% in the past five fiscal years. Last year, Turkish home appliances maker Arcelik and Dutch dairy giant Royal Friesland Campina NV made acquisitions in Pakistan.