August 1, 2016    5 minute read

The Economic Revival Of Pakistan

The New Outlook    August 1, 2016    5 minute read

The Economic Revival Of Pakistan

It’s not all doom and gloom. There are four main aspects that highlight areas of future growth for Pakistan, which could match other emerging economies: terrorism is at an all-time low, the China–Pakistan Economic Corridor (CPEC) is progressing, the business environment is good, and the diplomatic relations are improving.

Terrorism is at an all-time low, and it seems that it could be eradicated within the next couple of years. Terrorism in recent years has played a vital role in the decrease of foreign investments and in the instability in Pakistan. The government of Nawaz Sharif and the Chief of Army Staff (COAS) General Raheel Sharif have made tremendous efforts to stop terrorism in the country. As of December 2015, figures were realised from the military Operation Zarb-e-Azb in which 3400 militants located in North Waziristan (a mountainous region of north-west Pakistan bordering Afghanistan) were killed since the start, in 2014. These are unprecedented activities as Pakistan has faced dangerous amounts of terrorism since 2007 and has often been criticised by the Western world and neighbouring countries as a patron of terrorism. However, this doesn’t take into account the efforts to stop terrorism and what the country has suffered through. Despite army generals killed and over 35,000 people dead, the country still survived. The criticism they faced is soon to be forgotten as the $1.9bn operation is a key contributor to the 70% decrease in terrorism. It seems that Pakistan is moving away from the previous image/myth of sponsoring or supporting terrorists.

The New Outlook

The CPEC is a major factor for the renewed confidence in Pakistan. This is an ambitious $46bn project which will connect China to Central Asia and Africa due to the strategic position of Pakistan. The CPEC includes pipelines and road networks that will be built throughout Pakistan. The aims of the CPEC is to develop trade opportunities and transport routes from Kashgar in China to Gwadar Port in Pakistan as well develop economic zones along the route which will include power projects. As of July 2015, 502 kilometres of the 870 kilometres road connecting Pakistan’s deep-sea Gwadar port with the Western alignment of CPEC has been built within one and a half years. The CPEC will create jobs and trigger economic activity in Pakistan which over the last three decades has stagnated. Since 1988, Pakistan has achieved little economic growth because of corruption as well as due to multiple regime changes that also damaged the political system.

The CPEC allows an opportunity for Pakistan to progress. In addition, worries concerning security are being dealt through Zarb-e-Azb, and the army has stated their views on the long-term stability of Pakistan. The COAS has made it clear that this project will be completed at all costs and all enemies who attempt to sabotage this will be “thwarted”. Therefore, the CPEC investment is a statement to Pakistan heading towards a bright future, with more foreign investments.

The Stock Market Potential

The Karachi Stock Exchange has always been rated as one of the best-performing markets in the world. Before the Chinese crash, it grew by 16% in 12 months and for the past decades has been among the best-performing markets in the world. Bloomberg described Pakistan as the best-hidden frontier market due to the strong stock market performance as well as growth in the cement industry. In June 2016, Pakistan got the MSCI emerging markets upgrade as the country is heading towards stability and was recognised for being Asia’s best performing index. Despite facing the worst period in their history in the last five years, businesses still prospered and with terrorism at its lowest point after 2009, there are opportunities for the business environment to flourish further.

1.5trn rupees is the Pakistani budget for infrastructure this year

Finally, improved diplomatic relations and governmental stability are another catalyst for economic growth and all of the three points above link back to the government (though the COAS has played a big role). The decrease of terrorism has had a positive effect on the economy as there is stable growth at 4%, with projections of 7%.

It should also be noted that Nawaz Sharif has boosted infrastructure spending by 27%, to 1.5 trillion rupees for the year, and the economy has expanded at the fastest pace since the financial crisis, and this is because of the proactive role adopted by the government since they took over in 2013. Prime Minister Sharif has visited many countries and strengthened relations with the United States, the United Kingdom and China and has had visits to other countries such as Germany, Kazakhstan, Saudi Arabia, Turkey and Turkmenistan in an attempt to boost trade. The COAS also visited the United Kingdom and the United States as well as receiving an Order of Merit from Brazil for his efforts to fight terrorism, and he met the minister of defence to offer security assistance for the 2016 Olympic Games.

Conclusion

Despite Pakistan’s economy stagnating during between 2000-2013, with added instability, businesses across Pakistan have performed well as it can be seen from the growth of the stock exchange. Pakistan’s economic progress has yet to be noted because of previous links to terrorism and instability, but soon economists and investors will note the significance of investing in Pakistan. Had any other country faced the challenges Pakistan did, they would have dissolved, as seen in countries in the Middle East. However, Pakistan has managed to recover and fight terrorism, as well as show glimpses of economic progression due to the strong faith of its people. Therefore, a stable and prosperous Pakistan is a good outcome for everyone.

Get articles like this straight to your inbox each morning with our Breakfast Briefing. Sign up by clicking here!

Log in with your details

or    

Forgot your details?

Create Account

Send this to a friend