Pakistan succeeded in becoming the frontrunner in the recent MCSI`s Annual Market Classification Review. Morgan Stanley Capital International promoted Pakistan to the emerging markets’ (EM) list, an accomplishment even China could not achieve.
The global index provider declined to include China’s Class-A mainland shares to the EM index referring to market approachability problems in the country. Despite the fact that they guaranteed that Chinese A shares will again be checked on in its 2017 cycle, for the time being the choice is a hit to China’s aspiration to join international capital markets.
For Pakistan, on the flipside, the inclusion is a great prospect even though the it weighs a meager 0.19% in the EM index in contrast to a comparatively solid 8.8% it held in the MCSI Index. Some analysts are cautious about Pakistan`s mere non-existent placement in the index especially comparing it to Pakistan’s strong position as the 4th largest country in the EM Index, while others are optimistic mainly because of Pakistan’s image restoration as a credible state in terms of foreign investment, a ground on which China lost.
Also, this change is not simply restricted to the nation’s business sector credibility and consistency. Since the recent couple of years, Pakistan has figured out how to stay in the news for all the right reasons. The nation has finally understood how to detect the ideal harmony among financial and political euphoria since its non-military personnel authority chose to amalgamate its powers with the much persuasive military. As a result of which the nation has not only witnessed a decline in terrorism but also favorability in its economic indicators, which is recognized by the global entities.
Pakistan was termed as the “The Next Success Story” in 2015 by Daniel Runde because of the drastic change in its security situation. The Prime Minister was lauded for ‘working in tandem with the military to deliver peace and security’. Likewise, Pakistan`s enhanced security situation leading to an increase in business activity mainly in the real estate sector was highlighted by Bloomberg. Referring to Zameen.com, the report highlighted the increase in average prices in Karachi by 22% and 14% in Lahore just in a year’s time.
FT also lauded Pakistan it its story regarding “Pakistan making a strong case for the MSCI upgrade”. According to FT “Terrorism related death have fallen by 74% from their 2010 peak, economic growth has accelerated to a solid 4.5 % inflation has fallen sharply to around 3.3% and the fiscal deficit has narrowed markedly to around 4.1% of gross domestic product”. Furthermore, Pakistan’s enhanced security situation was applauded further by a global chief economists Charles Robertson’s analysis that “on a per capita basis, the likelihood of being killed by a gun in the US is now higher than that of dying as a result of terrorism in Pakistan”.
These positive results have not only provided the masses a reprieve but also increased economic opportunities for the country. Other than the popular game changing multi-billion dollar CPEC project other global investors are also deeming upon Pakistan as a potential investment prospect even in the previously ignored region of Baluchistan.
In more recent times, the only multinational from Pakistan, Engro Corporation sold 51% of its share to a Dutch dairy company for an estimated amount of $448 million.
Just recently, Engro Corporation, Pakistan’s only MNC sold 51% of its share to a Dutch dairy company for an estimated amount of $448 million. It also sold 28% of its shareholding in Engro Fertilizers to institutional and high net worth individuals in a private placement worth approximately $185 million. In another deal, Dawlance, a once privately owned company of white goods got acquired by Arcelik, a Turkish company for a sum of $258 million.
Other than these acquisitions, Bosch, a German company started operating in Lahore declaring Pakistan an “interesting market”. The German ambassador to Pakistan, Ina Lepel went on to say that due to its growing population, it is extremely hard to ignore Pakistan by multinational companies. Also, Pakistan was labelled as a “potential business destination” by BSH Hausgeräte GmbH which is the largest manufacturer of home appliances in Europe.
Furthermore, Audi has also decided to function in Pakistan due to the auto-policy which is now in place in Pakistan engaging international car manufacturers with substantial import duties. The German automobile company will start by testing the approval of its cards via exports of CBU Completely Built-up Units. If that is a success, the next part involves developing an assembling unit in the country. Other than these, Suzuki might inject another $460 million for another factory and Renault Nissan may invest in another plant.
Although the examples mentioned above signify towards the stressed upon “change” in Pakistan, but there is a flipside to it as well which is the decrease in FDI. As per a Reuters report, Pakistan’s $250 billion economy is developing at its quickest pace in 8 years. However, notwithstanding all positive pointers, the FDI inflow is much lower than the nation’s general necessity. Despite the fact that amid the initial eleven months of FY16, it expanded by 10% when contrasted with the same time frame in FY15, regardless it added up to an aggregate of one billion dollar which, as per financial experts, is low.
According to the belief of many analysts, the uncertainty surrounding the Pakistani Market in terms of investment is largely due to the non-existence of a long term foreign investment policy. On the face of it the situation is better but the previous terrorizing image comes to haunt the country. They stress that it will require extensive time for different speculators to put their trust in the once unstable market.
However, the MSCI redesign may have critical impact in reexamining the once polluted picture of Pakistan. The impacts are starting to appear already. While the nation hopes to draw in a FDI capital of $570 million, numerous spot the figure as high as $4.4 billion. Besides, news are doing rounds of a Pakistani and three remote financial specialists who want to gain a stake of up to 40% in the Pakistan Stock Exchange (PSX).
Without a doubt, the destiny of the nation is tied with its security circumstance, particularly in its economical capital, Karachi. Thus far, the improbable however welcome “association” between the two Sharifs have demonstrated productive for the nation.
Undoubtedly, the fate of the country is tied with its security situation, especially in its economic hub, Karachi. And so far, the improbable but welcome ‘partnership’ between the two Sharifs have proved fruitful for the country. And despite contrary reports, so far, the partnership appears to be intact, if not growing stronger.
With the end of the dominant Sharif’s reign, numerous are dubious about the destiny of the nation and how it will passage in a post Raheel-time. It can be concluded that even despite of a few niggles, Pakistan is on its way to an economic and political harmony.