Pakistan Economy, Entrepreneurs And Foreign Money
An article in Wall Street Journal today talks about the Pakistan economy, entrepreneurs and money from aborad in the forms of aid, remittances and expat investments. The title is “In Turbulent Pakistan, Start-Ups Drive a Boom” and it talks about the apparent paradox: Pakistan’s political scene is growing more clouded, but a clear demonstration of confidence in the country’s future is coming from an emerging economic force: Entrepreneurs. Since 1999, Pakistan has become one of Asia’s fastest-growing economies, the article mentions.
The article briefly mentions the growth in Telecom but does not go in the details of how the growth in telecom has provided additional jobs and opportunities for the public. I think more details on Telecom’s contribution to Pakistan’s economic growth would have been an interesting point in this article. A separate study estimated that the mobile industry has created 220,000 high-paying jobs in Pakistan and accounts for 5% of its Gross Domestic Product (GDP) and approximately 6% of the total taxes collected by the Central Board of Revenue.
Some excerpts are given below. I disagree with the ‘credit-friendly banks’ line - the banks in Pakistan have acted as aggressive loan pushers and have made tremendous fortunes at the expense of common people. However the point about the importance of younger generation is very true and businesses - including telecom companies - seem to be aware of this market segment.
Pakistan now permits 100% foreign ownership of its banks, prompting more consumer-friendly lending for home mortgages and cars. Meanwhile, a telecommunications monopoly has been broken up and policies have been tweaked to reduce user fees. Cellular subscribers have expanded 94% a year since 1999.
Not all are convinced the economic traction is sustainable, though. While Pakistan has seen an unprecedented consumer boom, 7.9% inflation and a sluggish job market have undercut modest income gains, contends ABN Amro’s senior economist in Islamabad, Sakib Sherani. In luring new industries and cultivating a broad-based business class that will keep the economy globally competitive, Pakistan lags behind countries such as Vietnam, as well as China and India, Mr. Sherani says.
Many critics also contend that substantial amounts of U.S. assistance — estimated at more than $1 billion a year — may be the biggest underlying reason why Pakistan’s economy is doing well. But the economy is also sprouting from the bottom, thanks to seed capital from abroad and more credit-friendly banks. Last fiscal year, Pakistan received a record $5.1 billion in foreign direct investment, the government says. Overseas remittances, which are what Pakistanis are returning from bank accounts overseas, hit $5.5 billion in the same period, also a record.
By sheer demographic weight, the younger generation will determine Pakistan’s direction. Of its 160 million people, 100 million are under the age of 25. Many are rural, poor and unprepared for a role in the global economy. But fast economic growth has also drawn more men and women to the cities, propelling some up the income ladder through education and new jobs.
Source: WSJÂ (subscription required)
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