by Monis Rehman, CEO of Rozee.pk
Based on Presentation at TIECON 2015 in Karachi
#5: Pakistan is the World’s most dangerous country
You are 50 times more likely to be murdered in St. Louis than killed in a terrorist attack in Pakistan
You are 10 times more likely to be killed in a car accident in the US than killed in a terrorist attack in Pakistan
*** 75% of VC funded startups fail - worried about 0.0009%? Really? ***
#4: Pakistan is small market with little purchasing power
■ 190 Million People
○ World’s 6th most populous country
■ (PPP) of $835 Billion in 2013
○ World’s 24th largest GDP
○ Higher than Netherlands, Malaysia and UAE
■ 54% of Population is youth
○ Rapidly growing middle class consumers
○ Motorcycle sales increased 4X over last 10 yrs
■ 37M people with GDP per capita > $12,200
○ Comparable to South Africa and China
#3: Pakistani economy is failing
■ Retail Sector is BOOOOMING
○ Clothing, electronics, food, healthcare, FMCG, automotive
○ GDP growth rate does not reflect market
■ Real Estate Prices are doubling
○ 50% to 100% growth quite common in USD terms
○ Still undervalued compared to India
■ KSE World’s 2nd Best Performing stock market in 2013
#2: Pakistan lacks scalable payment mechanisms
Rapid emergence of branchless products
○ UBL Omni, EasyPaisa, Mobicash, TimePey
○ Bank Alfalah, JS Bank, Others
■ IBFT Web Banking Huge Success
○ Secure account to account transfer across all banks
○ Online APIs
■ COD Logistics Providers
○ TCS, BlueEx, Leopard
○ Entrepreneurs rushing to fill this space
#1: Pakistan is not online
30 Million Internet Users
○ Growing to 65 Million over next 5 years
○ Larger than UK, Australia, South Africa, Saudi Arabia
■ 10 Million 3G Users
○ 15 Million smart phones
Major Tipping Point: Pakistan Middle Class Grows to 55% Of Population
E-Commerce Growth in Pakistan
Pakistan's Official GDP Figures Ignore Booming FMCG Sector
Musharraf Accelerated Human and Economic Development in Pakistan
Pakistan's Growing Middle Class
Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued
Fast Moving Consumer Goods Sector in Pakistan
3G-4G Roll-out in Pakistan
Pakistan is probably the best-kept secret in South Asia.
Foreigners are not investing because they are kept at bay by security threats, widespread perception of corruption and the law and order situation in the country. Amidst all these adversaries, London-based Edbiz Consulting predicts that Pakistan will experience a GDP growth rate of 12-15% for five years, once the security threats are dealt with successfully and the law and order situation improves.
Local businesses too, do not want to see multinational corporations enter Pakistan as they fear that they will cannibalise the local industry. Nestle exemplifies this fear. It entered the market of packaged milk in 1988 and swept away all the local businesses in dairy and beverages, either by buying them out or pushing them to the edge of the market, so much so that they become non-existent or go into oblivion (eg Haleeb Milk). In bottled water business and other beverages too, Nestle has broken the backbones of all the local players. This has created an oligopolistic market structure with a dominant leader in these markets.
Nevertheless there are some examples of failure as well. Tutti Frutti, for example, entered the Pakistan market by way of selling franchise to a local group that reneged on its own contractual obligations. The result was a complete loss of business for Tutti-Fruitti while the local group rebranded its business to Fruitti5.
Interestingly, it is not only the local business groups and industrial families that are guarding the secret of the true of Pakistan economy but also a number of local NGOs and other social sector organisations. Here, the education sector is an excellent example, barring foreign universities from operating in the country.
In the presence of extremely stringent requirements imposed by Higher Education Commission and the Ministry of Education, it is almost impossible for a foreign university to operate a campus in Pakistan. Consequently, local universities (public and private) are serving the market, mostly with low quality and sub-standard curricula along with hefty fees and fat profits.
Pakistan could benefit a lot if foreign universities were allowed to operate their satellite campuses here.
Now whether deliberate or un-intended, it seems as if there is a quasi-conspiracy going on to highlight only the ills of Pakistan’s economy, especially in the context of the on-gong war on terror and adverse perception of the law and order situation.
Income inequalities are also being over-emphasised to attract more aid and grants from multilateral institutions in the name of poverty alleviation and combating financial exclusion.
A consequence of all this is that the market players are seeking grants rather than investments, from both the domestic and international sources. The end result is a thriving social sector and the businesses owned by NGOs.
The local business families are enjoying these implicit barriers to entry for the multinational corporations and are enjoying the plums and prunes.
Though good for local businesses, it has negative implications for foreign direct investment in the country. Existing multinationals are gradually winding up their businesses. Pharmaceutical sector is the best example here.
With the exit of five foreign pharmaceutical firms from Pakistan in the last six years, the new foreign direct investment is going down, as seen by a net FDI of negative $47.4 million in the first eight months of the ongoing fiscal year.
If the trend continues, Pakistan will not only suffer on the FDI front but it is also feared that it will have an adverse effect on the quantity and quality of production. In critical sectors like pharmaceuticals, this implies a long-run threat to health and longevity
Great! Just saw this http://www.riazhaq.com/2015/03/major-tipping-point-pakistans-middle.html. Have been looking for this kind of data, glad to have found it in your blog.
Monis R: "Great! Just saw this http://www.riazhaq.com/2015/03/major-tipping-point-pakistans-middle.html. Have been looking for this kind of data, glad to have found it in your blog."
I'm glad to hear that. Please follow the links in the post to find a lot more detailed data on Pak middle class
With high risk comes the possibility of high returns. Pakistan is a "high risk" investment or a "penny stock" at the moment. If it comes out of its current difficulties all investors will become rich. But if it does not, they will lose their shirts.
Ras S: "With high risk comes the possibility of high returns. Pakistan is a "high risk" investment or a "penny stock" at the moment. If it comes out of its current difficulties all investors will become rich. But if it does not, they will lose their shirts"
Investors in Pakistan are enjoying much higher returns than most of the rest of the world. Japanese companies doing business in Pakistan have ranked the country second in the world in terms of business growth, according to a survey conducted by the Japan External Trade Organization (JETRO).
Great guest post. Good work!
Prof Riaz ul Haq sb,
On an unrelated note, India (#101) has beaten Pakiland (#122) on the social progress index (SPI). Nepal leads #98 followed by BD #100. Your comments are awaited, sir, as usual.
Majumdar: " India (#101) has beaten Pakiland (#122) on the social progress index (SPI). Nepal leads #98 followed by BD #100. "
Highly subjective indices like SPI and Legatum prosperity index defy credulity and common sense as spelled out by Abraham Maslow's hierarchy of needs.
Countries like India with vast majorities of its deeply deprived people stuck at the bottom of Maslow's pyramid is better measured by Oxford's multi-dimensional poverty index.
Oxford's MPI shows that India is only slightly better than Afghanistan in South Asia region in terms of multi-dimensional poverty that comprehends basic like income poverty, disease, basic sanitation, etc.
The Chinese- Qatari project to set up coal based project is good news!
Why is it very difficult to do business in Pakistan.
Working for a auto parts multinational company we have a major plant in Chennai, India. Recently I was on a team assigned to get the logistics going in a newly commissioned plant in Amritsar.
We use a light weight composite metal for which the steel component is outsourced and manufactured by a nearby Indian forging company in Chennai. For the Amritsar plant, our headquarters had identified a company just an hour away in Lahore which had similar capability like the Indian company.
Just to visit the Lahore manufacturer which was less than an hour by road, we had to fly to New Delhi to Dubai to Lahore! Unlike the NAFTA treaty here between Mexico, US and Canada, Pakistan has no such treaty with India. Long story short, we stayed with the Indian company in Chennai even though it was about a 1000 miles away - and this has worked out well.
Other MNCs probably have similar problems. I am told India has given Pakistan MFN status for some years now but, Pakistan has not. Pakistan has lot to gain from MNCs setting shop in India because there is substantial spillover if not outright outsourcing.
Miguel: "Why is it very difficult to do business in Pakistan."
Pakistan ranks better than India in ease of doing business.
If you do business in India, you'll find it easier to do business in Pakistan.
As to MFN, it means very little in practice because of India's bureaucracy imposing non-tariff trade barriers.
"If you do business in India, you'll find it easier to do business in Pakistan. As to MFN, it means very little in practice because of India's bureaucracy imposing non-tariff trade barriers."
Doing business ranking is subjective. It is not a science.
In any case these are the exports figures for 2013. I will gladly take a lower ranking in so called ease of business to a vastly superior export ranking.
Exports $313.2 billion: merchandize exports,
$150.9 billion: services exports,
$464.2 billion: total
Exports $25.05 billion (2013 est.)
Cotton and Yarn (9.2%)
Non-Knit Men's Suits (4.3%)
Refined Petroleum (3.2%)
Ravi: "$464.2 billion: total "
US GAO has found that India's export figures are highly exaggerated by as much as 20X. India includes H-1B slave wages as India's exports.
India's other economic data is also fudged, according to French economist Thomas Piketty:
"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data." "In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "
37 million at 12200? I calculated, even assuming Pakistan population to be 190 million, per capita should have been $2375 ignoring the rest 153 million people. Only Riaz can pull it off
Singh: "37 million at 12200? I calculated, even assuming Pakistan population to be 190 million, per capita should have been $2375 ignoring the rest 153 million people. Only Riaz can pull it off"
Do the calc again.... $12,500 times 37 million is 462 billion. And then consider the fact that Pakistan's PPP GDP is almost a trillion US dollars now.
The guest post indicates the following.
■ 190 Million People
○ World’s 6th most populous country
■ (PPP) of $835 Billion in 2013
■ 37M people with GDP per capita > $12,200
Therefore @singh is correct. Also, please note the per capita is 'greater than' $12,200
-$451.4 billion (37M x $12200 at least)
=$383.6 billion for the rest of the population (153M)
= $2507 at most per capita PPP GDP for 153M Pakistanis.
Your guest has distorted other facts, such as US crime and accident data, as well. However, that is for another time.
The security risk in Pakistan is very high compared to other countries. Terrorism in Pakistan has become a major and highly destructive phenomenon in recent years. The annual death toll from terrorist attacks has risen from 164 in 2003 to 3318 in 2009, with a total of 35,000 Pakistanis killed between September 11, 2001 and May 2011.
According to the government of Pakistan, the direct and indirect economic costs of terrorism from 2000–2010 total $68 billion. President Asif Ali Zardari, along with former President ex-Pakistan Army head Pervez Musharraf, have admitted that terrorist outfits were "deliberately created and nurtured" by past governments "as a policy to achieve some short-term tactical objectives" The trend began with Muhammad Zia-ul-Haq's controversial "Islamization" policies of the 1980s, under which conflicts were started against Soviet involvement in Afghanistan.
Zia's tenure as president saw Pakistan's involvement in the Soviet-Afghan War, which led to a greater influx of ideologically driven Muslims (mujahideen) to the tribal areas and increased availability of guns such as the AK-47 and drugs from the Golden Crescent.
NS: "The security risk in Pakistan is very high compared to other countries. "
The risk is rapidly declining since the launch of Pakistani military's anti-terror campaign. The civilian death toll in 2014 was 1781, down from 3001 in 2013. Compare this 30,000 Americans dying from gun violence every year.
NS: "Pervez Musharraf, have admitted that terrorist outfits were "deliberately created and nurtured" by past governments "as a policy to achieve some short-term tactical objectives"
What you call "terrorist outfits" are no different than the people hired by US CIA, Israeli Mossad or India's RAW to carry out "covert ops" in many countries around the world.
Ask how many Cubans and Iranians, Chileans and others have been killed or injured by US CIA operatives.
Read the following to get "straight talk" from Ex-US Def Sec and Ex-Spook Robert Gates:
Anon: "$2507 at most per capita PPP GDP for 153M Pakistanis."
Pakistan's per capita median income is $73.26 per month in terms of 2005 PPP (purchasing poverty parity) US dollars as of 2010. It is higher than India's $60.48 and Bangladesh's $51.67 per capita per month, according to the World Bank.
Annual median per capita for Pakistan, India and Bangladesh are $879.12, $725.76 and $619.80 respectively.
Median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. Mean income (average) is the amount obtained by dividing the total aggregate income of a country by the number of people in that country. A country's median income is a better indicator than the average income to gauge how a population is faring economically.
Median income also helps assess the size of the middle class in India, Pakistan and Bangladesh based on the definition used by Asian Development Bank and World Bank. Both of these institutions define middle class as those earning $2 or more per capita per day in terms of 2005 PPP US$.
Pakistan median income of $73.26 per month translates into $2.44 per day, higher than $2 per day income level used by ADB and WB to define middle class. It means that more than 50% of Pakistanis are in middle class. India's $60.48 per month puts 50% of Indians in middle class while Bangladesh's $51.67 means fewer than 50% of Bangladeshis are in middle class.
" Pakistan median income of $73.26 per month translates into $2.44 per day, higher than $2 per day income level used by ADB and WB to define middle class. It means that more than 50% of Pakistanis are in middle class. India's $60.48 per month puts 50% of Indians in middle class while Bangladesh's $51.67 means fewer than 50% of Bangladeshis are in middle class."
Why then is Pakistan considered a low human development country by the all inclusive 2014 Human Development Index?
CC: "Why then is Pakistan considered a low human development country by the all inclusive 2014 Human Development Index?"
Why does the Oxford MPI index say India is the most deprived country in South Asia except for Afghanistan?
"India is home to over 340 million destitute people and is the second poorest country in South Asia after war-torn Afghanistan...In South Asia, Afghanistan has the highest level of destitution at 38%. This is followed by India at 28.5%. Bangladesh (17.2%) and Pakistan (20.7%) have much lower levels" Colin Hunter, Center for Research on Globalization
Increases in per capita income and human development index are often used as indicators to represent improvements in the lives of ordinary people in developing nations in Asia, Africa and Latin America. Both of these have significant limitations which are addressed by Oxford Poverty and Human Development Initiative (OPHI)'s MPI, multi-dimensional poverty index.
The MPI brings together 10 indicators, with equal weighting for education, health and living standards (see table). If you tick a third or more of the boxes, you are counted as poor.
#Pakistan's Naseeb Networks, owner of online jobs market, Raises $6.5 Million in Series C VC Funding http://techin.asia/1Elyeys via @Techinasia
Naseeb Networks, the parent company of employment marketplaces Rozee.pk and Minhati.com, announced today that it has raised US$6.5 million in a Series C funding round. The investment is led by Vostok Nafta and Piton Capital, bringing the company’s total venture funding to US$8.5 million.
The company plans on using the fresh injection of capital to accelerate growth in its target markets of Pakistan and Saudi Arabia.
In 2008, Naseeb Networks became the first startup from Pakistan to receive VC funding. Since then, investors have seen 680 percent return on their capital, and revenue has increased hundred-fold.
“As talent continues to move online at a rapid pace in emerging markets, businesses need increasingly sophisticated recruiting technology customized to nuanced local market dynamics,” said Monis Rahman, CEO Naseeb Networks, in an emailed statement.
Vostok Nafta managing director Per Brilioth and Piton Capital partner Greg Lockwood will join the Naseeb Networks board. Both will also play a key role in charting the future course and strategy of the company.
“We are excited to partner with Naseeb Networks and impressed with what Monis and his team have achieved in Pakistan and Saudi Arabia,” said Brilioth.
#Pakistan ranks 7th among 21 countries for #mobilemoney accounts and growing fast. #EasyPaisa http://brook.gs/1SdQ4wo
Pakistan ranked 7th in terms of the percentage of adults with mobile money accounts among the 21 countries, achieving the highest percentage of all of the Asian FDIP countries. Yet there is significant room for growth — as of 2014, only about 6 percent of adults had a mobile money account.
The State Bank of Pakistan (SBP) has clearly expressed its commitment to advancing financial inclusion, which earned the country a commitment score of 100 percent. The SBP developed Branchless Banking regulations in 2008, with revisions in 2011. These regulations were explicitly intended to promote financial inclusion. More recently, the country’s National Financial Inclusion Strategy was launched in May 2015. In terms of quantitative assessments of financial inclusion, the SBP tracks supply-side information on branchless banking in its quarterly newsletters.
Recent public and private sector initiatives may help advance mobile money adoption. For example, a re-verification initiative for SIM cards was mandated by the government and initiated earlier in 2015. Mobile network operators have been promoting registration of mobile money accounts since the biometric re-verification process is more intensive than the identification requirements needed to register a mobile money account.
Earlier, in September 2014, the EasyPaisa mobile money service decided to eliminate fees related to money transfers between Easypaisa account customers and cash-out transactions for a set period. As of April 2015, the number of person-to-person money transfers had increased by about 2500 percent.
Still, barriers to financial inclusion remain. A 2014 InterMedia survey noted that while distance was less of a barrier to registration than previously, distance did affect the frequency with which users engaged with mobile money services. Therefore, expanding access points could further facilitate use of mobile money. Increasing the number of registered accounts could also provide individuals with more opportunities to engage with financial services beyond basic transfers — the InterMedia survey found that as of 2014, about 8 percent of adults were over-the-counter mobile money users, while 0.3 percent were registered users.
135 Million Millennials Drive World's Fastest Retail Market
Middle class expected to surpass U.K., Italy over 2016-21
September 28, 2017, 1:00 PM PDT
Nearly two-thirds of Pakistan population under 30 years old
Pakistan’s retail stores forecast to grow by 50% in 5 years
Pakistan’s burgeoning youth and their freewheeling attitude toward rising incomes have turned the nation into the world's fastest growing retail market.
The market is predicted to expand 8.2 percent per annum through 2016-2021 as disposable income has doubled since 2010, according to research group Euromonitor International. The size of the middle class is estimated to surpass that of the U.K. and Italy in the forecast period, it said.
Pakistan's improving security environment, economic expansion at near 5 percent and cheap consumer prices are driving shoppers to spend up big. Almost two-thirds of the nation's 207.8 million people are aged under 30, according to the Jinnah Institute, an Islamabad-based think tank.
“We have a new millennial shopper at hand. They don’t mind spending to have the kind of lifestyle they would like,” said Shabori Das, senior research analyst at Euromonitor. “It’s not like the Baby Boomer generation where savings for the future generation was important.”
Pakistan is bucking the trend in the U.S. -- where stores are closing at a record pace as e-commerce undermines bricks-and-mortar. It's also attracting foreign operators: Turkish home appliance maker Arcelik AS and Dutch dairy giant Royal FrieslandCampina NV entered the market last year via acquisitions. Meanwhile, Hyundai Motor Co., Kia Motors Corp. and Renault SA are all building plants in the South Asian nation.
Pakistan’s retail stores are expected to increase by 50 percent to 1 million outlets in the five years through 2021, Euromonitor said. Its three biggest malls, Lucky One in Karachi and Packages Mall and Emporium Mall in Lahore, opened in the past two years.
Pakistan is mirroring what India went through about four years ago. Both countries have young populations with more income and less inclination toward saving which is a distinct difference to what retailers elsewhere are dealing with, said Das.
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