Saturday, December 11, 2021

Pakistan Forecast to Become World's 7th Largest Consumer Market By 2030

The World Economic Forum forecasts that Pakistan will rise to become the world's 7th largest consumer market by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7 in the next 10 years. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico.  Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan.  Already, the year 2021 has been a banner year for investments in Pakistani technology startups

Consumer Markets in 2030. Source: WEF


Here's Brookings Institution overview of the top 5 movers in the next 10 years:

1. Bangladesh (+17 positions), from place 28 to 11; future consumer class: 85 million (+50 million) Global share of consumer class: 0.8 percent (2020), 1.6 percent (2030). Bangladesh’s consumer class is projected to more than double by 2030: Today, 35 million people in Bangladesh spend more than $11 a day. By 2030, it will be 85 million! 

2. Pakistan (+8 positions), from place 15 to 7; future consumer class: 121 million (+56 million) Global share of consumer class: 6 percent (2020), 2.3 percent (2030). Pakistan will add 56 million new consumers by 2030, for a total of 121 million. This means that in 2030, for the first time, every other Pakistani will be able to spend more than $11 per day. 

3. Vietnam (+7 positions), from place 26 to 19; future consumer class: 56 million (+21 million) Global share of consumer class: 9 percent (2020), 1.1 percent (2030). Vietnam’s consumer class will grow from 35 million to 56 million within this decade, which is a success story particularly of the middle-aged generation: Consumers between 45 and 65 years of age will contribute nearly 25 percent of Vietnam’s spending, as opposed to 20 percent today. 

4. Philippines (+6 positions), from place 20 to 14; future consumer class: 79 million (+38 million) Global share of consumer class: 1 percent (2020), 1.5 percent (2030). The Filipino consumer class is projected to grow steadily, from 41 million today to 79 million in 2030. By then, more than two-thirds of the Filipino population will spend more than $11 per day. 

5. Indonesia (+2 positions), from place 6 to 4; future consumer class: 199 million (+76 million) Global share of consumer class: 2 percent (2020), 3.8 percent (2030). While Indonesia is only moving up two places, it is experiencing a large gain of consumer class growth. Starting from an already large base of 123 million, Indonesia will have almost 200 million consumers in 2030, making it the fourth-largest consumer market in the world.

Countries in Asia are expected to show the biggest growth of the consumer class among the world's 30 biggest consumer markets. The consumer class is defined as a group of people who spend more than $11 per day. Currently, 55% of the global consumer class live in Asia. 

World's Top 30 Consumer Markets. Source: World Data Lab's Market Pro 


Global investors chasing bigger returns will almost certainly shift more of their attention and money to the top 10 consumer markets, including Pakistan.  Already, the year 2021 has been a banner year for investments in Pakistani technology startups

Vehicles and home appliance ownership data analyzed by Dr. Jawaid Abdul Ghani of Karachi School of Business Leadership suggests that the officially reported GDP significantly understates Pakistan's actual GDP.  Indeed, many economists believe that Pakistan’s economy is at least double the size that is officially reported in the government's Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP.  A research paper by economists Ali Kemal and Ahmad Waqar Qasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented. 

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. There is a lot of currency in circulation. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year,  a double-digit growth of 10.4% year-on-year.   Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years.  The CIC/M2 ratio is now close to 30%. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India. 

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7 comments:

Riaz Haq said...

Abdul Razak Dawood
@razak_dawood
I have been informed that during the month of Nov 2021, 🇵🇰 Pakistan’s exports had the fastest growth rate in South Asia🔼. Our exports grew by 33.5% compared to 🇧🇩Bangladesh’s 31.3 % and 🇮🇳India’s 26.5% growth.

https://twitter.com/razak_dawood/status/1469215349484793857?s=20

Riaz Haq said...

Doing business in Pakistan: Perceptions and realities
Farhat Ali (former President, Overseas Investors Chamber of Commerce and Industry)

https://www.brecorder.com/news/40139309

A prospective foreign investor primarily looks at two aspects while selecting a country for investment:

1) Security of investment and country risk;

2) Return on investment and profitability.

Security of investment primarily relates to country risk in terms of its political and economic stability, security of men and material and sustainability of business.

While the other aspect relates to market and business analysis which has more to do with numbers. Pakistan with a budding middle class, growing consumer market, rising purchasing power of consumers and liberal investment incentives and government policies undoubtedly presents an investor an attractive market to be in and the numbers may add up to a healthy return on investment and profitability.

The issue for Pakistan is ‘security of investment and country risks’ factor, which undermines investor’s comfort and trust in its security of investment. This has a lot to do with the country’s perception.

Pakistan’s entities and functionaries responsible to mobilise FDI in the country have primarily been harping on presenting the investors attractive numbers and abundance of opportunities, propagated through countless seminars and webinars. Unfortunately, however, they prefer to remain silent on mitigating investor’s concerns on security of his investment.

Just last week, the BoI organised an investment promotion seminar to apprise the potential foreign investors on investment policies and opportunities in Pakistan in the field of education and innovation technologies, highlighting Information Technology sector as one of the fastest-growing sectors of Pakistan’s economy, contributing around one percent to the GDP of the country at about $3.5 billion and reaching $ 7 billion in the next two to four years. The numbers sound great but numbers alone may not be convincing enough when it comes to attracting a sizable and strategic investment in the sector.

Also, this week the Embassy of Switzerland in Pakistan and the Swiss-Asian Chamber of Commerce Switzerland (SACC) conducted a webinar titled ‘Doing Business in Pakistan – Perceptions and Realities’. It was participated, among others, by the Swiss investors who already have their footprints in Pakistan and potential investors from Switzerland – primarily, the Small and Medium Enterprises. The webinar presented a much balanced investment landscape of Pakistan as a land of business opportunities for Swiss investors and also the pitfalls an investor could come across in the process. The diversity between the apprehensions of the potential investor driven by country’s perception and the reality of success experienced by the Swiss investors operating in Pakistan was apparent. The gap between reality and perception needs to be fairly worked at and narrowed down. The Swiss Business Council Pakistan and Swiss-Asian Chamber of Commerce Switzerland shall consider to work on bridging the gap between Pakistan’s perception and the reality on ground.

Pakistan needs more of similar cooperation with other countries.

Media plays an important role in shaping people’s beliefs and ideas. More specifically, media have a great influence on how investors think about foreign countries where they have no footprint. Investors looking to invest abroad certainly pay attention to what is reported in the media about a country they intend to invest in.

Waqar Ahmed Khan said...

So, 2020-30 will be the decade of ECOM and it's Stakeholders to cash out the most.

Riaz Haq said...

#Karachi-based #Pakistani #grocery #startup Krave Mart, which promises 10-minute delivery, raised $6 million in its pre-seed funding round, which was led by MSA Capital, ru-Net, Global Founders Capital and Zayn Capital. #technology #VentureCapital https://www.bloomberg.com/news/articles/2021-12-15/grocery-startup-scores-pakistan-s-largest-early-stage-funding

A funding frenzy in Pakistan’s startup scene this year has seen investments cross $300 million after two e-commerce companies raised fresh funds.

Bookme, the largest online travel and ticketing platform in the country, raised $7.5 million in its Series A round, according to its founder Faizan Aslam. Bagallery, a beauty and fashion startup, separately raised $4.5 million in a similar round, co-founder Salman Sattar said. Both rounds were co-led by Zayn Capital, Lakson Venture Capital and Hayaat Global.

samir sardana said...

Pakistan has the 2nd highest absolute incremental number of growth,in the middle class - although it has proximately the same pop as Indon-ass-eaah.

The projections are wrong,as they are made by statisticians on excel sheets,with minor sensitivity analysis.

They did NOT factor,the GEOMETRIC surge in GDP and efficiency in Pakistan,due to technology penetration and innovation,and the execution and commercialisation of new projects,in oil and gas,ports,CPEC,logistics,and its downstream impact on manufacturing.

Indon-ass-eeah thrives on oil and energy,which is in the hands of a few,and was and will remain so,forever.Corruption is a Priori,and so,nothing will change in the future,to cause an explosion,in consumer spend.On the other hand,probablity dictates that with the perpetuation of inequity,Indon-ass-eaah is ripe,for a Islamic takeover.

It is not difficult to contemplate a situation,wherein Bangladesh is overtaken by Islamists - after the current crop of leaders decay.dindooohindoo

Riaz Haq said...

Pakistan to rebase it GDP to 2015-16

https://www.thenews.com.pk/print/915868-rebasing-of-national-accounts-to-be-carried-out

The World Bank (WB) has validated the overall methodology for conducting the rebasing exercises in Pakistan and pointed out some deficiencies in respective areas, which could be rectified within the next few days.

The Pakistan Bureau of Statistics (PBS) is ready to present the re-basing of national accounts exercise before the high-powered technical committee, Governance Council and then Economic Coordination Committee of the Cabinet (ECC).

With this exercise, some key economic indicators will be improved but some will be further worsened. For instance, with the ballooning of GDP growth, total public debt in percentage of GDP will be improved. However, the FBR’s tax-to-GDP ratio may be worsened.

"We have accomplished 36 surveys/studies out of total assigned 42 exercises for changing the base year from 2005-06 to 2015-16 to calculate figures of national accounts as it will help ballooning the overall GDP growth rate in a substantial manner,” top official sources confirmed to The News.

“The re-basing of National Accounts will be accomplished within the current fiscal year and provisional GDP growth figure for 2021-22 will be calculated on the basis of rebasing exercise."

Top official sources said there are some practical difficulties in the way of rebasing of national accounts as the PBS conducted 42 studies on various sectors of the national economy to finalise weights on the basis of the latest data compiled in the fiscal year 2015-16. The PBS conducted different studies in the last four years. Earlier, such studies were conducted by consultants through the private sector but for the first time it was being done by the PBS itself, so the quality of the done studies needs to be thoroughly scrutinized before granting approval for rebasing of national accounts on the basis of 2015-16.

The last rebasing of national accounts was done in 2005-6 during the Musharraf/Shaukat Aziz regime. Earlier, the rebasing was done in 1999-2000 after a period of 20 years, so it was decided that the rebasing exercise would be done after five years. The economic census was also done in 2005-6 and the national accounts were re-based on the basis of the same data, so it was decided that the rebasing of national accounts should be done after a period of 10 years.

The PBS captured the data on the stipulated time-frame but for accomplishing all other requirements, it took almost four years for conducting other studies. Now it is hoped that the rebasing exercise will be implemented to change the base year from 2005-6 to 2015-16 because in 10 years, there are many ground realities changed. So fresh data capturing methodology should be devised to get a more realistic picture of the national economy.

Riaz Haq said...

Motta’s, which started operations in 1986 as a single-floor store selling basic grocery items, now has three floors and has acquired two stores in DHA called The Mart by Motta’s. Diamond Superstore, which started in 1958 as a kiryana selling aata, has seven branches in Karachi, including one with a food court and a children’s play area; Naheed Supermarket (known for introducing pre-packaged masalas and pulses to the market) began as a 1,000-feet square outlet and Lahore’s Al-Fatah began operations in the 1940s (under the name Al-Hamra) and now has 23 branches. All the above believe they have barely scratched the surface of Pakistan’s modern retail sector.

https://aurora.dawn.com/news/1144173

A number of local modern trade stores, along with mid-sized and smaller general stores, have opened and/or expanded, especially following the launch of international modern trade (IMT) stores, such as Carrefour, Makro and Metro in the 2000s. According to Muhammad Ibrahim, Owner, Motta’s, once IMTs entered Pakistan, people realised that the grocery store business was not limited to a traditional general store experience; consumers could be offered more convenience and variety and the business was profitable and "cash-rich." Mohammad Sheikh, Director, Al-Fatah, adds that market expansion in the last couple of years has been “aggressive” especially during the pandemic. “If you are uncertain about how long the pandemic will last, the best business to invest in is groceries,” he says.

In 2020, Pakistan’s food and grocery retail market had total revenues worth $52.6 billion, representing a compound annual growth rate (CAGR) of 8.1% between 2016 and 2020, according to a report, Food and Grocery Retail in Pakistan. Although the market value of the modern retail sector cannot be adequately estimated due to the industry being largely undocumented, store owners agree that it has been expanding pre- and post-Covid-19.

“In the beginning, consumer needs were limited – people would shop at kiryanas or neighbourhood general stores – but now their expectations are changing. For example, as people become more aware of global cuisines, they want to prepare non-desi food, such as pastas and burgers at home and there is a rise in demand for those ingredients,” explains Sheikh. As a result, established stores like Al-Fatah, Diamond Superstore, Motta’s, Naheed Supermarket and many others have kept evolving by revamping their stores, opening more branches and investing in product variety to stay above the competition and meet consumer demand. Although 225 million Pakistanis have access to more than two million retail outlets, of which approximately 800,000 are grocery retail stores (kiryanas, kiosks, department stores, supermarkets and medical-cum-general stores), the ratio of grocery stores to the population is still not enough.

“Compared to our population, the number of operational stores is nothing – one to two percent maybe. We are at the infancy stage, so even if 1,000 stores like Naheed Supermarket open in Pakistan, there will still be room for growth”, says Munsub Abrar, Director, Naheed Supermarket.

Although investing in the grocery retail business remains an attractive proposition, what are the intricacies involved in opening and maintaining an LMT store and how sustainable is the business for new players?

1 Investment
It can cost between Rs 20 to 30 million (small, basic stores) to Rs 80 to 100 million (large-scale stores) to open a grocery store, depending on the size, type of furnishings used (fixtures, equipment, etc.) fixed costs (rent, salaries, etc.) and product inventory.

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Store owners agree that staying relevant is key and they must keep evolving, whether by expanding, investing in aesthetic changes to cater to the changing customer shopping experience or offering incentives, such as loyalty cards and working with brands on special discounts. Sheikh emphasises that their most loyal customers are the older generation but they need to cater to the new generation by keeping up with what they want.