Pakistan's KSE-100 index soared 86% in 2024, making it the second best among major indexes, according to Bloomberg News. The 2024 performance of KSE-100 represents its best year since 2002 when it shot up 112%. The top 3 performing stock markets in 2024 were Argentina (114%), Pakistan (88%) and Kenya (79%), according to Topline Securities. The US markets posted double digit gains with the AI-driven tech-heavy NASDAQ-100 up 27.6%. Small and medium US companies performed well with the Russell 2000 Index edging out India's Sensex with an 8.9% return.
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| Pakistan Among Top Performing Stock Markets in 2024. Source: Bloomberg |
Clearly, the $7 billion IMF program helped restore some investor confidence in Pakistan's economy in 2024. It was also boosted by remittances from overseas Pakistanis in July-October 2024 which soared nearly 35% YoY to $11.8 billion as compared to $8.8 billion in July-Oct 2023. The fact that the KSE100 shares valuations relative to earnings still remain at historic lows (PE ratio of just 5.9) is an indication that investors have doubts about the sustainability of the economic improvements in the country. Among the top investor concerns appear to be worsening internal security situation and rising political instability.
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| History of Pakistan's KSE-100 Returns Since 1995. Source: Bloomberg |
Pakistan's macroeconomic indicators have significantly improved in 2024. Inflation has come down dramatically, from 29.7% in December 2023 to 4.1% in December 2024, resulting in aggressive monetary easing of 900 bps by the State Bank of Pakistan (SBP). The current account deficit has turned into a surplus of $729 million in November 2024 and the currency has remained stable. In spite of the run-up, the KSE-100 2025 forward PE ratio of 5.9x is still substantially below the 10-year average P/E of 8.2x.
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| Pakistan Shares Index PE Ratio. Source: Arif Habib |
Pakistan's exports grew to $16.56 billion, an increase of 10.52% in July-Dec period in 2024 over the same period in 2023, while imports grew 6.11% to $27.73 billion in this period. Pakistan's textile exports grew 9.7% in the first six months of the current fiscal year. The trade deficit in July-December FY25 increased 0.18% to $11.17 billion from $11.15 billion over the prior year. In December, the deficit jumped 34.80% to $2.44 billion from $1.82 billion in December 2023. The trade gap contracted to $24.08 billion in FY24 from $27.47 billion in the preceding year. The current account improvement was helped by remittances from overseas Pakistanis in July-October 2024 which soared nearly 35% YoY to $11.8 billion as compared to $8.8 billion in July-Oct 2023.
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| Pakistan Textile Exports. Source: Arif Habib |
In 2024, Pakistan began to make some progress to resolve the economic impact of high electricity rates and rising debt (PKR 2.1 trillion) owed to the independent power producers (IPPs). While the government terminated or renegotiated power purchase contracts (PPAs) with some IPPs, the consumers took matters into their own hands and started an unprecedented solar energy revolution.
As a result of the latest round, PPAs with five IPPs were terminated as a first step. Two of the five IPPs took haircut deals, accepting a discount of up to PKR 20 billion. 18 other IPPs face possible conversion to take-and-pay contracts, whereby the state-owned off-taker will only be liable to pay for energy consumed by the grid, eliminating capacity charges, according to a report by the Institute for Energy Economics and Financial Analysis.
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| Pakistan Solar Projects Seen From Satellites. Source: Atlas Via Bloomberg |
High power prices are fueling a massive solar buildout across Pakistan, according to a Yale360 report. Solar imports from China so far this year have already outstripped imports across all of last year, Bloomberg reports. Panels purchased in 2024 amount to 17 gigawatts of capacity, enough to raise Pakistan's total power capacity by a third. A satellite data analysis done in April by Norwegian firm Atlas revealed around 400 solar plants across the country, clustered mostly in industrial hubs. But many more installations went undetected, the geospatial analysis firm said. Most panels have been deployed almost equally across homes, factories, and farms, solar distributors say.
Related Links:
2021: A Banner Year For Tech Startups in Pakistan
Is Pakistan Ready For AI Revolution?
Digital Pakistan 2022: Broadband Penetration Soars to 90% of 15+ Population
STEM Enrollment in Pakistan Exceeds One Million
Digital Public Infrastructure in Pakistan
Solar Power Boom in Pakistan
Pakistan at 75
Growing Presence of Pakistani Women in Science and Technology
Riaz Haq's Youtube Channel
17 comments:
I think stock markets are an unreliable indicator of the underlying health of an economy, as it is driven more by "optimism" and "pessimism" than any sound reasoning.
"SBP reserves fall $371m in two weeks"
https://www.dawn.com/news/1882791/sbp-reserves-fall-371m-in-two-weeks
During the last two weeks, the SBP forex holdings witnessed an outflow of $371 million higher than the $300m loan United Bank Ltd arranged for the country recently.
The central bank reported on Thursday that the reserves fell $143m to $11.71bn during the week ended on Dec 27, 2024. The preceding week witnessed an outflow of $228m.
The State Bank said the reserves were used for external repayment obligations. The massive debt servicing has been a key hurdle that has marred economic growth despite improved remittance inflow. The remittances sent by the overseas Pakistanis are almost cost-free for the country but over 90pc is used for the debt servicing.
Pakistan will have to pay $26.1bn in debt servicing in FY25.
On Dec 31, the UBL announced that it had arranged a $300m loan for Pakistan without disclosing how much interest the country has to pay for short-term borrowing.
The government is struggling to roll over $14bn while it could not improve the economy to any sustainable level that may help it borrow from international markets.
Financial experts said the government planned to launch Euro and Panda bonds, but nothing could be done. They said the short-term $300m UBL financing would be much costlier.
It would seem that aside from weak economic fundamentals and forex reserves, the ongoing internet shutdowns and slowdowns are taking a toll on the economy as well.
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"Pakistan tops world in economic losses due to internet shutdowns"
https://www.dawn.com/news/1882972/pakistan-tops-world-in-economic-losses-due-to-internet-shutdowns
Pakistan leads the world in terms of financial losses suffered as a result of outages and shutdowns of internet and social media apps last year.
Pakistan topped the charts with a cumulative financial impact of $1.62 billion.
This was higher than the cost in countries like Sudan and Myanmar, which are ravaged by civil wars.
The report, released by Top10VPN.com, an independent VPN reviewer, said the global internet disruption lasted 88,788 hours, causing a total financial loss of $7.69bn.
For Pakistan, Top10VPN.com tracked 18 instances of deliberate internet shutdown for three major reasons — elections, “information control”, and protest — in 2024.
These disruptions lasted 9,735 hours and impacted 82.9 million users.
According to the estimate, the ongoing shutdown of social media platform X since February 18 was the costliest, with a total estimated impact of $1.34bn.
It was followed by the internet shutdowns by authorities in Balochistan between July 16 and August 21 in response to protests by the Baloch Yakjehti Committee in Gwadar. The shutdown, lasting for 864 hours, cost $11.8m.
Myanmar had the second costliest shutdown, lasting 20,376 at a cost of $1.58bn. Sudan was the third, with 12,707 hours of shutdown, costing $1.12bn. Venezuela was fourth with $1.12bn, Bangladesh was fifth with $796.6m, and India sixth with $322.9m.
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"IT minister draws MNA’s ire with ‘all OK’ mantra"
https://www.dawn.com/news/1882781/it-minister-draws-mnas-ire-with-all-ok-mantra
The meeting of the National Assembly Standing Committee on IT and Telecom witnessed a heated debate over the throttling of internet, leading to an emotionally charged response by the minister of state for IT and the PTA chairman.
The minister, Shaza Fatima Khawaja, told the committee that the IT or any other industry has not reported any issues related to the internet.
The minister’s response angered PPP MNA Sharmila Farooqi, who expressed disappointment over the officials’ attitude.
“Four meetings [of the committee] have been held, and yet no solution has been found. Either we are lying or the government is,” Ms Farooqi said.
While addressing the minister, Ms Farooqi said her comment that the industry faced no losses due to internet disruption was contrary to the facts.
“My husband runs an e-commerce company; he has suffered losses due to repeated internet slowdowns,” Ms Farooqi claimed.
“Is everyone lying about internet speed? The fact is whenever the PTI gives a protest call, we all face internet shutdown immediately,” she said.
“Are we fools who come to the committee meeting only to hear that everything is going well,” she said while referring to the government’s responses to prevalent internet issues.
The committee chairman, MNA Syed Aminul Haque, also expressed concern over the internet slowdown.
He said that in an earlier meeting, the committee was told by the Pakistan Telecommunication Authority (PTA) that the speed would improve by October 2024.
“But the concerns persist regarding internet issues, which are causing the financial losses amounting to millions of dollars to the country,” Mr Haque added.
Arif Habib Limited
@ArifHabibLtd
The KSE100 index has posted a solid growth of 84%, adding 52,676 points during CY24
The main sectors driving this growth were Banks, contributing 13,847 points, followed by Fertilizers with 11,169 points and E&P chipping in 10,012 points. These sectors have contributed 35,028 points to the index making 66% total contribution.
In terms of individual companies, FFC contributed the most with 6,086 points, MARI has added 3,977 points, UBL has added 3,957 points, and OGDC accounted for 2,613 points.
https://x.com/ArifHabibLtd/status/1875417038639837225
The programme, titled "Pakistan Country Partnership Framework 2025-35", aims to improve social indicators in the most neglected but important areas
https://www.thehindu.com/news/international/world-bank-to-approve-20-billion-lending-package-for-pakistan-report/article69065590.ece
The World Bank is set to approve a $20 billion indicative lending package for Pakistan – a pioneering 10-year initiative to protect its funded projects from political transitions and focus on six targeted areas, according to a media report.
The programme, titled "Pakistan Country Partnership Framework 2025-35", aims to improve social indicators in the most neglected but important areas, The Express Tribune newspaper reported, citing official documents.
It will focus on reducing child stunting, combating learning poverty, enhancing climate resilience, decarbonising the environment, expanding fiscal space, and boosting private investment to improve productivity.
These areas have broad support across the political spectrum and are expected to remain unaffected by government changes during the 2025-2035 period, which is anticipated to include at least three general elections.
This 'Country Partnership Framework' is scheduled to be approved by the World Bank board on January 14, following which the global lender's Vice President for South Asia Martin Raiser is also expected to visit Islamabad.
According to the World Bank's assessment, the planning framework "will help shield the programme from the country's volatile polity and frequent swings in priorities and requests that follow government changes." The requests arising from government changes have caused 'fragmentation of the World Bank portfolio and diluted impacts,' it said.
A key Pakistani official, who was part of the framework development, said that the World Bank picked Pakistan as the first country where it would introduce the 10-year partnership strategy.
"The World Bank's total indicative lending envelope for fiscal year 2025 to 2035 will total around USD 20 billion," reads a draft of the framework.
Out of the $20 billion, the World Bank's concessional arm, the International Development Association (IDA), will lend $14 billion and the remaining USD 6 billion is projected to be provided through the relatively expensive window - the International Bank for Reconstruction and Development (IBRD).
"However, these indicative loans will depend upon the evolution of the IDA funding over the years, Pakistan's standing and performance, including with respect to the Sustainable Development Finance Policy and its debt vulnerability indicators," reads the document.
In addition to the USD 20 billion loans to the government of Pakistan, the new framework also aims to support another USD 20 billion private lending by the World Bank's two other arms - the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). This brings the total package to USD 40 billion but the official loans will be equal to USD 20 billion, according to the newspaper.
The new lending will focus on six areas that "currently enjoy strong support across the Pakistani political spectrum", according to the documents. However, it will phase out lending from 10 less-impactful sectors, such as transport, power transmission, telecoms, tertiary healthcare and higher education.
The World Bank's concessional and expensive lending will be meant for "larger projects on average, more frequent scale-ups and expansions, and less pilots and one-off operations", according to the planning document.
The Washington-based Bank's new strategy marks a shift from "short-term macro-fiscal adjustment programmes and often small investments scattered in a wide array of sectors, to more selective, stable and larger investments in areas that are critical for sustained development and growth".
Economy improving, inflation to drop further: SBP chief
The governor attributed the positive trends to an increase in exports and remittances.
https://tribune.com.pk/story/2521065/pakistans-economy-improving-inflation-to-drop-further-sbp-chief
State Bank of Pakistan (SBP) Governor Jameel Ahmed stated on Thursday that the country is on track to meet its economic targets, with its debt levels and balance of payments remaining under control.
Speaking at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Ahmad said that inflation is expected to decline further in January, while interest rates will also decrease due to improvements in debt repayment
The governor attributed the positive trends to an increase in exports and remittances, which have contributed to a better current account balance. He emphasized the need to further boost exports, as this will lead to improvements in the current account and balance of payments.
Ahmad also highlighted the country's debt repayment progress, noting that the total debt has remained stable at around $100 billion. He added that the country has made a payment of $2 billion towards its Eurobond obligations and has successfully converted short-term debts into long-term ones.
Meanwhile, FPCCI President, Atif Ikram Sheikh, urged the State Bank to reduce interest rates to single digits to support economic growth. He noted that inflation has decreased to 4.1% in December 2024 and that the justification for double-digit interest rates no longer exists.
Other speakers at the event emphasised the importance of export-led growth, stating that it is the only viable and sustainable path for the country's economy.
They also called for easier and cheaper access to finance for trade, industry, and small and medium-sized enterprises
"After a decade, govt wakes up to market Gwadar port"
https://www.dawn.com/news/1883968/after-a-decade-govt-wakes-up-to-market-gwadar-port
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The commercialisation of Gwadar Port, built more than a decade ago, remains a non-starter, turning the multi-billion-dollar infrastructure facility into a white elephant instead of becoming a transhipment hub.
This was the gist of a high-level meeting on the operationalisation of Gwadar Port called on the directives of the prime minister and presided over by Planning and Development Minister Ahsan Iqbal, who blamed high-ups of the Ministry of Maritime Affairs (MoMA) and National Logistics Cell (NLC) for lack of marketing and non-professional handling of ‘crown jewel’ of $50bn China-Pakistan Economic Corridor.
Highly informed sources said all the stakeholders, including the government, were at unease over the fact that Gwadar had not kept pace with similar other facilities in the region and thus did not offer promised business and employment opportunities to the locals in the absence of trade activities. This, coupled with poor civic facilities like water and electricity shortages, they believed, was being exploited by external factors, leading to repeated unrest and protests.
Therefore, Prime Minister Shehbaz Sharif, in a recent meeting, ordered the routing of 60pc of all public sector cargoes through Gwadar to at least trigger port activities and directed the planning minister to look into the matter and report back as to why the port has not picked up and suggest corrective measures.
At the outset, the minister noted with concern the absence of Balochistan government representation while the operationalisation of Gwadar was under discussions. “Unfortunately, nothing has been done for marketing of transshipment cargos”, the minister was quoted as telling the participants adding the relevant authorities had failed to tell reach out to shipment companies and traders abroad to explain how shipments from China through Gwadar could be cheaper than traditional routes.
This comparative analysis for competitive marketing should have been in full swing two years ago to generate trade and shipment activities and provide employment opportunities to the local people. “Without port activities and business opportunies, (Gwadar) port has been turned into a while elephant”, he said.
He deplored that CARs were ready to transport their cargos through Gwadar but “we have not been able to prepare a business strategy for commercialisation”, adding that the friendly governments and relevant shipping stakeholders in CARs should have been pursued through attractive marketing. “We should learn from neighbouring countries who build product reputations abroad and garner consumer attention even before the products are rolled out”, he said.
The minister directed the relevant authorities to hire an international consultant which could workout cost benefit analysis of shipments through Gwadar in comparison with other ports in the region, could explain how shorter could be this route along with shipment duration and costs etc to attract business through Pakistani missions abroad. He told all the participants that whatever they say in the meeting would be reported to the prime minister for implementation.
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Pitching Gwadar as part of some kind of "cheaper" overland route to transport cargo to and from China was perhaps nonsensical since China's industries are concentrated on its east coast and its arid west being under-developed. Aside from the distance and fuel costs involved in transporting goods over the said overland route, the treacherous geography in GB and security challenges in Balochistan would have only made it look even less attractive.
On a related note, India's first deepwater container transshipment port was recently built and operationalized at Vizhinjam in my state (Kerala).
https://en.m.wikipedia.org/wiki/Vizhinjam_International_Seaport_Thiruvananthapuram
Vineeth: "After a decade, govt wakes up to market Gwadar port"
It takes time to utilize a brand new port in a remote part of the county.
Gwadar will require significant connectivity infrastructure such as roads, railways, warehouses, piperlines etc to make it really useful.
It also requires building the city of Gwadar itself.
In a few decades, I see it becoming a thriving port city like Karachi.
https://www.riazhaq.com/2017/10/will-gwadar-grow-to-become-major.html
BTW, a new container port terminal built in Karachi recently has ramped up very quickly. Why? Because all the other infrastructure is there already.
https://www.riazhaq.com/2019/10/karachis-new-port-terminal-wins.html
Please read this post I wrote back in 2021:
https://www.riazhaq.com/2021/10/is-cpec-development-focus-shifting-from.html
That's just the point. Unlike Karachi port (or the new Vizhinjam port in India), Gwadar is too remote and there are no industries in its vicinity to utilize the port. A city cannot be built out of empty desert land or fishing hamlet if there isn't an economy (industries of some kind) to support it. Else it would turn into a ghost city with empty buildings. Secondly, the hopes of Pakistani authorities for Gwadar turning into a node for overland freight shipments from China was always unrealistic due to issues I mentioned earlier. Unlike what the Planning Minister says in the report I posted above, its not a failure in marketing the port to shipment companies and traders, but that it just happens to be a lot more easier and cheaper for China to sent its freight through ports on its east coast than on a long overland route across its arid western provinces, mountains of Karakoram, and then across KP and Balochistan. Similarly, any plans to utilize Gwadar for energy shipments from Central Asia would have to contend with the Afghanistan factor, and the security challenges in Balochistan itself. Gwadar might be of strategic use to China as a port for its naval ships in the Arabian sea, but other than that there is little economic rationale for it presently. (And as for that strategic use, Pakistani authorities would have to keep in mind that US may not exactly be happy with the country allowing Chinese naval ships to use Gwadar.)
As I understand, Pakistani economy is currently under the phase of "stabilization", and this isn't the first time the country's economy has been saved from the brink of default and "stabilized" under an IMF program due to its strict diktats on govt expenditure, fiscal deficit targets, interest rates etc. As a result, this "stabilization" has come at the cost of economic growth. The real challenge would be to move on from this state of "stability" to that of sustainable economic growth - 'sustainable' being the operative word here - rather than recurring "boom-bust" cycles.
https://www.dawn.com/news/1884417/fragile-recovery
"There are signs that the country’s economy has stabilised after nearly three years of a full-blown crisis. Indeed, the role of the SBP in pulling off this stability cannot be overstated. Headline inflation is down to just 4.1pc and is expected to fall further to around 3pc this month, the rupee-dollar exchange rate remains stable, the haemorrhage of foreign exchange has been stemmed, the country’s international reserves have grown from $3bn to over $11bn despite debt payments, and the current account is running a surplus on soaring remittances and somewhat improved exports. The interest rates are coming down and private credit is said to be picking up pace. Today, the economic environment is a lot less volatile and uncertain than it was even a few months ago."
"These are all positive developments and must be appreciated. That said, the recovery remains fragile and dependent on bilateral debt rollbacks and IMF crutches. The drying official and private capital inflows offer little reassurance about the future. The economy still remains trapped in a low-growth equilibrium despite improving macro indicators. Many believe that growth will remain elusive for some years, at least as the economy is yet to recover the kind of strength it needs to support faster expansion without hitting yet another, deeper crisis. The government is slow in implementing structural reforms and the price of this inaction is being borne by citizens and organised businesses."
"A lot of hope is attached to the promised investments from the Gulf nations, which the ruling party policymakers expect could offer them space to pursue faster growth. Until that happens, they can try selling ambitions like Uraan Pakistan."
And further reading on "Uraan Pakistan":
https://www.dawn.com/news/1882574/trying-too-hard
Vineeth: "That's just the point. Unlike Karachi port (or the new Vizhinjam port in India), Gwadar is too remote and there are no industries in its vicinity to utilize the port"
The whole idea of inclusive development is to help develop the least developed areas of Pakistan. And I believe Pakistan is succeeding in this.
According to the Inclusive Development Index (IDI), Pakistan generally ranks higher than India, meaning Pakistan is considered to be performing better in terms of inclusive development compared to India; in recent reports, Pakistan has been ranked around 47th while India is ranked around 62nd out of emerging economies, with India lagging behind its South Asian neighbors including Pakistan, Sri Lanka, and Nepal.
https://www.riazhaq.com/2018/01/cpec-is-transforming-least-developed.html
If "inclusive development" is all that Pakistan aimed to do at Gwadar with this project, there were clearly far better ways to go about it than build a port or an airport in the middle of nowhere. If a project that you have invested millions into is sitting empty or idle and is turning into a 'white elephant' - and remember, it's not me who is calling it a 'white elephant', but the Pakistani authorities themselves who previously sought to hype it as a 'game changer' - it clearly indicates bad planning and ineptitude at best or monumental corruption at worst. In the case of Gwadar port, I think it is the former. Those who envisioned the project clearly didn't think it through.
For one, Chinese weren't going to send lines of container trucks from their industrial heartland in the east coast all the way to Gwadar to ship them to Europe or the Middle East. Or the other way round. Notwithstanding any imaginary concerns about the Straits of Malacca becoming closed to Chinese shipping, it is clearly far more economical for them to do shipping from their vast array of gigantic ports on the east coast itself.
Secondly, China did not relocate its industries to Gwadar. At least, not anywhere near the scale that Pakistani authorities imagined or hoped for. And with high levels of unemployment becoming a concern for the Chinese authorities now, I think there is less chance of that happening any time soon.
And thirdly, like I said before, one cannot build a port in a remote, desolate place and then expect a bustling city and industries to organically develop around it. If that development model were to work, it already should have and Pakistani authorities wouldn't be calling it a 'white elephant'.
That said, there are plenty of such examples of Indian infrastructural projects having failed to meet expectations or turned into 'white elephants' too. So, I wouldn't say such failures are anything specific to Pakistan.
Here is a story from my own state about how Vallarpadam Container Transhipment Terminal at Kochi having 'failed' (not to be confused with the new Vizhinjam Container Transhipment port which is located further south near state capital Thiruvananthapuram). And this is despite Kochi being the bustling financial capital of the state with good infrastructure and many industries.
"How India’s first container hub terminal failed"
https://www.fortuneindia.com/enterprise/how-indias-first-container-hub-terminal-failed/105292
Pakistan’s remittance inflow at $3.1bn in December 2024, up 6% month-on-month - Pakistan - Business Recorder
https://www.brecorder.com/news/40342066
Remittances increased 33% year over year to $17.8 billion in 1HFY25, compared to $13.4 billion in 1HFY24. Home remittances play a significant role in supporting the country's external account, stimulating Pakistan's economic activity as well as supplementing the disposable incomes of remittance-dependent households.
A reality check from today's DAWN editorial.
"Increased inflows"
https://www.dawn.com/news/1884673/increased-inflows
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REMITTANCES sent home by migrant Pakistani workers have been a saving grace for the country’s faltering economy for the last two decades. With export revenues growing at a painfully slow pace — and often stagnating for years in between — and foreign capital and investment inflows drying, successive governments have relied on remittances to push import-based consumption to boost growth. Thus, even a tiny increase in cash sent home by overseas Pakistanis can always be a moment for celebration. The ongoing fiscal year has proved to be exceptional for remittances, with inflows soaring by a third to a record level of $17.8bn in the first half of the year to December from $13.4bn a year ago. This lends hope that the country will be able to meet the targeted inflows of $35bn in remittances, far surpassing export earnings, this year. No wonder the prime minister has used this occasion to “congratulate’ the nation and boast of his government’s success in stabilising the economy while underlining the commitment of overseas Pakistanis to their country’s development.
The increase in remittances is indeed a positive development for the economy as these have been driving the current account surplus for the last several months, contributing significantly to exchange rate stability and improvement in the State Bank’s forex reserves in the absence of foreign direct investment, as well as any meaningful bilateral and multilateral inflows. But it is not a wise policy to rely on them for external account stability. Remittances have their downsides as well. Studies have shown that higher remittances boost consumption and imports, lead to decline in domestic manufacturing and exports, and make economies of recipient nations more vulnerable to global and regional economic crises. No matter how favourable an impact these have on economic growth, remittances cannot be a substitute for exports and foreign private investment, which increase domestic productivity and generate jobs. Moreover, the quantum of remittances a country receives can never be predicted. Remittances represent hard-earned money by migrant Pakistanis that must be channeled into productive use for the country’s social and economic development instead of squandering on imported luxuries. At the same time, the government needs to devise a strategy to increase industrial and agricultural productivity to boost exports and reduce reliance on uncertain remittances.
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Being the native of an Indian state with few industries and employment opportunities and which survive on remittances from its legions of workers in the Middle East and elsewhere, I can relate. Remittances are a poor substitute for industrial development and employment generation at home.
"Gwadar’s potential"
https://www.dawn.com/news/1884672/gwadars-potential
THE Gwadar deep-sea port, completed in 2007, was supposed to be a shining success for the other newly built ports in the region and beyond. Yet eight years after the official launch of port operations — an event marked by the first-ever container ship with cargo from China passing through it — it lags behind even other China-built ports in Sri Lanka, Nigeria and Cameroon. Barely any vessel calls at Gwadar. Given the situation, it is not surprising that the planning and special initiatives minister is vexed over the failure of relevant authorities to “market the Gwadar port to expedite its commercialisation”. Built as part of the multibillion-dollar CPEC transport and energy infrastructure project, the port remains a non-starter and, in the words of the minister, a “white elephant instead of becoming a regional transhipment hub”. During a meeting the other day, he blamed the maritime ministry and the NLC for their unprofessional handling of what would be the ‘crown jewel’ of the corridor initiative.
There’s a reason the government is concerned over the fact that the Gwadar port has not kept pace with similar facilities in the region. Robust trade through Gwadar is crucial to develop the region and alleviate rampant poverty in Balochistan. Hence, Prime Minister Shehbaz Sharif has recently ordered to route 60pc of all public sector cargoes through Gwadar to “trigger port activities’. That is unlikely to happen anytime soon due to capacity constraints and much higher cost of transportation from Gwadar to the rest of the country compared with Karachi. On his part, the planning minister has directed the relevant authorities to hire an international consultant to prepare a plan to compete with other regional ports in attracting business for Gwadar. But a market plan, no matter how grand, cannot improve the security situation in Balochistan or bring peace to Afghanistan, without which it is impossible to get business from Central Asia. Nor can it convince China to relocate its industry here for export westward, or start importing oil through Gwadar. Moreover, it won’t help address the capacity and power supply issues that constrain trade through the port. Unless the issues containing the potential of Gwadar are addressed, no executive order or marketing plan can make the port city a regional shipping and trade hub.
Beijing and Islamabad have pledged to deepen their bilateral ties, renewing a commitment for the second phase of the strategic China-Pakistan Economic Corridor.
https://www.dw.com/en/china-pakistan-agree-to-upgrade-cpec-cooperation/a-71276419
China and Pakistan have reaffirmed their vow toward the development of the second phase of China-Pakistan Economic Corridor (CPEC), the two nations said on Saturday.
The remarks came after Chinese Vice Foreign Minister Sun Weidong and Pakistan's Foreign Secretary Amna Baloch met in Beijing on Friday for the fourth cycle of diplomatic talks at the vice-foreign ministerial level.
"The two sides agreed that China and Pakistan are ironclad friends and all-weather strategic cooperative partners, and the time-tested friendship between the two countries has grown even stronger," China's Ministry of Foreign Affairs said in a statement on Saturday.
CPEC 2.0
Both foreign officials also co-chaired the fifth meeting of the CPEC Joint Working Group on International Cooperation and Coordination (JWG-ICC) on Friday.
Beijing said that the two countries agreed on the need to "upgrade" the CPEC.
The agreement — which was signed in 2015 — pledges billions of dollars of Chinese investment in Pakistan's infrastructure.
The project is part of China's mammoth Belt and Road Initiative (BRI) which is aimed at developing trade routes to connect with the rest of the world.
Islamabad said on Friday that a "high quality development" of CPEC 2.0 would focus on industrialization, Special Economic Zones (SEZ's), clean energy, agriculture and livelihood projects.
A statement from the Pakistani Ministry of Foreign Affairs posted on social media said "both sides reiterated firm resolve to elevate Pakistan-China ironclad ties to a new pedestal of cooperation and collaboration."
Pakistan's economic hurdles
Chinese investment in the region is facing the challenges posed by political instability, economic stagnation and energy supply issues.
Earlier this week, hundreds of Pakistani protesters blocked a section of a key highway that forms part of the CPEC in protest against power outages.
Locals in the snowy Gilgit-Baltistan region suffered blackouts of more than 20 hours amid temperatures of -15 degrees Celsius (5 degrees Fahrenheit).
The demonstrations on the Karakoram Highway in Hunza Valley prevented dozens of freight trucks from crossing into China.
Pakistan is hoping the greater Chinese investment to help alleviate its economic woes.
Reports of these talks, MoUs, agreements and declarations to invest in Pakistan come dime a dozen, but how much of these would translate into real investments remains the moot question. In case you happened to miss it, there was another news report about Pakistan's Commerce Minister travelling to Seoul and having talks with his South Korean counterpart. Again we hear grand declarations about South Korea relocating its industries to Pakistan, waxing eloquent about Pakistan's 'strategic location', 'vast market of 250 million', proximity to 'high growth regions' and how Korean industries can use Pakistan as the base to target markets in East Africa and Central Asia etc. But this is just what we have been hearing for more than a decade with China and CPEC as well, so it remains to be seen how much of these grand visions, government-level talks and declarations would materialize into real investments by private South Korean firms.
As the saying goes, the proof is in the pudding.
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"Talks begin for economic partnership with South Korea"
https://www.dawn.com/news/1884230/talks-begin-for-economic-partnership-with-south-korea
South Korea’s Trade Minister Inkyo Cheong has outlined an ambitious plan to relocate Korea’s industrial base from its Northeast Asian neighbours to Pakistan following the signing of the Economic Partnership Agreement (EPA) between the two countries.
At the ceremony, Mr Cheong highlighted the potential of targetting new markets in East Africa and Central Asia by using Pakistan as a strategic manufacturing hub. Additionally, he expressed a strong desire to bring a business delegation to Pakistan to explore investment opportunities and strengthen ties between the private sectors of both nations.
“With Pakistan’s cost-effective labour, liberal investment policies, and proximity to high-growth regions, we see immense potential to develop a dynamic partnership that benefits both sides,” Mr Cheong stated.
The Korean minister reiterated his commitment to advancing the negotiations in the shortest possible timeframe. “The EPA represents not just a trade agreement but a transformative partnership that will elevate Korea-Pakistan ties to unprecedented levels,” he said.
He emphasised Pakistan’s strategic importance, stating that Pakistan’s geographical location and its vast market of 250 million people make it a critical partner for Korea’s economic growth plans.
Mr Cheong also announced his intention to personally lead the first round of negotiations, which will be hosted in Pakistan. He invited Pakistan’s Commerce Minister Jam Kamal to co-chair the discussions, signalling Korea’s commitment to fostering a high-level partnership.
Both sides expressed their determination to conclude the negotiations expeditiously. The Terms of Reference (TOR) provide a comprehensive framework for addressing key issues such as trade liberalisation, investment, digital trade, intellectual property rights, and climate resilience.
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"Institutional debacle"
https://www.dawn.com/news/1884875
Governance quality and perceptions of the political, economic, and policy climate are critical in shaping overall conditions for investment and growth. Given the mobility of international capital, strong institutions play a major role in attracting and retaining investment inflows.
Pakistan’s declining growth and investment trends are largely attributable to the continuous decline of its institutions. This is reflected in poor governance assessments in the World Bank’s ‘Worldwide Governance Indicators’. When benchmarked against regional counterparts, Pakistan’s performance is subpar. For instance, in ‘government effectiveness’, India’s percentile rank was 67.9, while Pakistan lagged at 30.6 in 2023. In ‘political stability and absence of violence/terrorism’, Pakistan’s rank was a mere 6.6. Similarly, in ‘regulatory quality’, Pakistan’s score of 19.8 was well below India’s 47.2.
Governance in Pakistan’s public institutions has reached a critical point. The political leadership remains oblivious to the fact that their actions, motivated by political ambitions and vested interests, are eroding key state institutions — parliament, judiciary, and executive. Consequently, Pakistan is trapped in a low-growth, low-investment cycle, facing insurmountable development challenges. To illustrate, the economy grew by just 0.98pc in the first quarter, well below the projected 3pc for this year.
The current self-styled democratic government, often called a ‘hybrid regime’, continues to undermine civilian institutions. Parliament, a key state organ, is in a precarious position.
The establishment’s interference in political affairs is an old issue, but it has recently taken active charge of the country’s economic management, formalised by the creation of the Special Investment Facilitation Council (SIFC) in June 2023. Initially premised on creating a one-stop facility to attract foreign investment from Gulf countries, the SIFC has virtually become a supra-cabinet, with the military leadership now overseeing economic matters.
The army chief’s meetings with businessmen to discuss economic issues, coupled with assurances of $100 billion in foreign investment, illustrate the SIFC’s growing influence. Coordinated by a military officer and granted the status of a division, the SIFC has created a parallel structure within the government.
Investment is not secured through government MoUs or by mantras. It is the private sector that creates opportunities and negotiates with foreign investors. Investment depends on political and economic stability, policy consistency, investment security, and global competitiveness of businesses. Despite the SIFC’s efforts, investment fell to a record low of 13pc of GDP in FY24, below the long-term average of around 15pc. Pakistan attracted just $1.9 billion in FDI, a mere $275 million increase from FY23, and below the $1.936bn in FY22.
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