Pakistan\'s Economic Outlook

$Page 1: Pakistan\'s Economic Outlook$
Protection notice / Copyright notice

Pakistan’s Economic Outlook

“Tremendous Growth and Investment Opportunities on a Fertile Land”

By Mehdi Yasir


ContentsCountry Profile

Key DataEconomic OutlookEnergy Demand & SupplyWater & Infrastructure Demand

Development OutlookGDP Growth 2009-2012

GDP Growth 2006 – 2011GDP Growth 2010 – 2014: Macroeconomic Indicators/Rolling Targets

Growth by main IndustriesSpecial Programs by Government (incl. Infrastructure)

Sectoral Growth ProgramsPublic Sector Development Program (PSDP) 2011-12PSDP Growth 2010-11 to 2011-12

Protection notice / Copyright noticeProtection notice / Copyright noticePage 3

Country Profile: Key Data

Name: Islamic Republic of Pakistan

Size of the country: 803,943 sq. km. (310,527 sq. mi.)

Bordering countries:Afghanistan 2,430 km, China 523 km, India 2,912 km, Iran 909 km

Climate: Pakistan lies in the temperate zone. The climate is generally arid, characterized by hot summers and cool or cold winters, and wide variations between extremes of temperature at given locations

Natural resources: petroleum, natural gas, Minerals and Agriculture

Population: 187,342,700 (2011)

Population growth rate: 1.57%

Literacy rate: 49.9% (Male: 63%; Female: 36%)


LD T Traction

Country Profile: Economic Outlook (2010 est.)GDP - real growth rate: 2.4%

GDP - composition by sector:agriculture: 20.8% industry: 25.2% services: 54%

Industrial Production Growth Rate: 4.9%

Inflation rate (consumer prices): 13.4%

Budget 2011-12:

revenues: $28.6 billion expenditures: $32.1 billion

Industries:Textiles and apparel, Food processing, Pharmaceuticals, Construction, Materials, Paper products, Fertilizer, Shrimp, Cement, Sugar, Water, Shipbuilding, Infrastructure, rice, leather goods, sports goods, chemicals, manufactures, carpets and rugs

Agriculture - products:wheat, rice, cotton, sugarcane, tomatoes, melons, dates, fruits, citrus; mutton, chickens, eggs, milk


Country Profile: Energy Demand & Supply

The Biggest Challenge & Opportunity:

Electricity - Demand: 17,428 MW (June 2011 Avg) Electricity - Supply: 13,632 MW (June 2011 Avg)

Demand-Supply Gap: 3,796 MW (June 2011 Avg.)

Ever increasing Energy shortfall provides an opportunity for LD DW Business

Gas being the most expensive source of Energy, Energy Efficiency and Conservancy is a Focus

Electricity sources:Oil, Coal, Hydel, Thermal, Nuclear and LPG


Pakistan suffers from a dearth of infrastructure in the water, irrigation,; infrastructure which is essential for sustained growth and competitiveness both in the local and international markets. The gaps between demand and supply in these sectors are alarming.

Without adequate irrigation resources, power, and transportinfrastructure, the very sustainability of Pakistan as an independent nation may be at stake as shortages could lead to increased social discontent and disharmony amongst the federation and the provinces.

Pakistan is on the list of the most water stressed countries in the world, and forecasts indicate that available resources are depleting rapidly, possibly leading to a state of water scarcity in the next two decades.

Much of the water infrastructure is in poor repair and Pakistan has to invest almost Rs60 billion (US$1billion) per year in new large dams and related infrastructure over the next five years.

Country Profile: Water & Infrastructure Demand

Source: World Bank Report – Pakistan Infrastructure Implementation Capacity Assessment (PIICA)


Poor infrastructure services result in constrained economic activity and reduce the country’s growth potential. Elasticities of business sector output and productivity with respect to public core infrastructure investments are usually much higher than that of private business investments.

The GoP’s ability to plan and deliver infrastructure projects effectively will determine the future pace of growth of the country.

According to the World Economic Forum Survey (2006-07) of 125 countries, Pakistan ranked 67 in basic infrastructure category.

Historically, the balance between demand and supply of infrastructure facilities has faced a chronic imbalance. For instance, the aging and inadequate irrigation and water infrastructure deficit alone is estimated at Rs4 trillion (US$70 billion) and Pakistan needs to invest almost Rs60 billion (US$1 billion) per year in new large dams and related infrastructure over the next five years.

Country Profile: Water & Infrastructure Demand



Development Outlook: Water & Infrastructure

The GoP has responded to this demand by planning extensive infrastructure expansion.

The federal Mid Term Development Framework (MTDF), allocates Rs2,162 billion (US$36 billion) to the development of large

infrastructure—embarking on an ambitious program to upgrade roads, railways, air, power, water and irrigation and other infrastructure. Of this, Rs. 993 billion (US$16.3 billion) will be through the Public Sector Development Program (PSDP).

The MTDF envisages a tripling of the infrastructure PSDP from an average of Rs150 billion per year to Rs440 billion per year. The current FY11 PSDP allocation of Rs 730 billion has already eclipsed this target.



Development Outlook: Construction Industry A Growth Engine for Host of Industries and Services



Development Outlook: Government's Vision 2030 - Energy for Growth

Source: Planning Commission, GoP


GDP Growth 2009 – 2012:

Source: World Economic Outlook, June 2011; Annual Plan 2011-12

Pakistan’s Growth Performance-A Comparative

GDP Growth 2006 - 2011


GDP Growth 2010 - 2014Macroeconomic Indicators/Rolling Targets


Growth by Main Industries:

Economic Growth:GDP growth for 2011-12 is projected at 4.2% with agriculture growth at 3.4%, industry at 3.7% and services at 5%.

Sectoral Growth: Agriculture: is envisaged to grow by 3.4% in 2011-12 against 1.2%achieved last year (below par fue to floods). Major crops which recorded negative growth of 4% last year is projected to grow at 3%; minor crops from 4.8% to 2%, livestock from 3.7% to 4% and fisheries from 1.9% to 2%.

Industry: The manufacturing sector as a whole is expected to grow by 3.7% against 3% recorded last year. Growth of large scale manufacturing (LSM) at 2% largely depends on better supply of electricity and gas. Construction


Growth by Main Industries:Gross Domestic Product 2009-2012


Special Programs by Government (incl. Infrastructure):Sectoral Growth Programs

Commodity Producing Sectors: Agriculture: Ministries of Agriculture and Livestock have been devolved. All future development programs will now rest with provinces. Federal Government will focus mostly on devising national policies and promoting research and development.

Manufacturing, Minerals and Commerce: Under draft industrial policy 2011, manufacturing activities will be diversified, SMEs to be promoted, cost of doing business and better regulations to be addressed. An allocation for Rs 2 billion has been earmarked for the Ministry of Industries and Production while Rs 130 million has been earmarked for Textile and Rs 364 million has been set aside for the Commerce Sector.

Physical Infrastructure:Energy: Overcoming energy shortage is the highest priority. An amount of Rs 137 billion including Rs 19.4 billion in foreign aid has been reserved for the power sector; whereas, Rs 0.9 billion is allocated for the fuel sector. Major projects to be financed are Basha Diamer Dam, Chasma 2, 3 and 4, Neelum Jehlum hydropower, Guddu Power Plant and combined cycle power plant at Chicho Ki Malian. During 2011-12 the plans submitted by GENCOs, PPIB and WAPDA will provide 2,110 MW.


Special Programs by Government (incl. Infrastructure):Sectoral Growth Programs (cont’d)

Water Resource Development: The strategy is to focus on irrigation, drainage, flood control /reconstruction and enhancing capacity of storage. For 2011-12, Rs 34 billion has been allocated. Major projects ofthis sector are: raising of Mangla Dam, Gomal and Satpara Dams, Kachi, Rainee and Pat Feeder Canals, Right Bank Outfall Drain from Sehwan to Sea (RBOD-II) and Balochistan Effluent Disposal into RBOD (RBOD-III).

Urban Development: Major programs include economic development of cities and Prime Minister’s One Million Housing Program for Low Income Groups. Priority is accorded to the reconstruction and rehabilitation of infrastructure damaged by the floods 2010.

Environment: Focus of the Environment Policy is on establishing an environment friendly, just and sustainable economic system and achievement of MDGs 2015.The subject is devolved to the provinces. Major programs are executed by them


Special Programs by Government (incl. Infrastructure)Public Sector Development Program (PSDP) 2011-12

Federal PSDP for the year 2011-12 has been kept at Rs 300 billion which is higher by 61% than revised estimates 2010-11– inclusive of ERRA Rs 10 billion (with foreign assistance component of Rs 36.8 billion).

In Federal PSDP, highest allocation has been provided to infrastructure, which is 57% of the total allocation, followed by 42% allocation to the social sectors.

The Corporations' PSDP 2011-12 has been placed at Rs 72 billion indicating an increase of 110% over revised estimates 2010-11.

The share of Federal Ministries/Divisions in 2011-12 PSDP is Rs 157 billion indicating an increase of 101.3% over revised estimates 2010-11.

The provincial development programme for 2011-12 has been estimated at Rs 430 billion as against Rs 266 billion in revised estimates 2010-11 showed an increase of 61.7%.

In view of resource crunch, priority has been accorded to projects near completion, protection of contractual bindings with foreign funded projects and balanced development.

For the year 2011-12 National Economic Council (NEC) has approved an overall size of PSDP at Rs 730 billion showing an increase of 58% as against the revised estimate at Rs. 462 billion, which is equal to 3.5% of the GDP, compared to 2.6% of GDP in the Revised Estimates 2010-11.

The Salient features of PSDP allocation for 2011-12:

Federal PSDP has been developed in line with the New Growth Strategy which focuses on the “software (innovation, institutional reforms and entrepreneurship) as opposed to the “hardware (physical infrastructure) of growth.


Special Programs by Government (incl. Infrastructure):PSDP Growth 2010-11 to 2011-12


LD T Traction

Special Programs by Government (incl. Infrastructure):PSDP Growth 2010-11 to 2011-12 (cont’d.)


“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”Antoine de Saint-ExuperyFrench writer (1900 - 1944)


Thank you for your attention!

Mehdi YasirDy. General ManagerBusiness DevelopmentIndustry Sector

Siemens (Pakistan) Engg. Co. Ltd.B-72, Estate AvenueS.I.T.E., KarachiPakistan

Phone: +92 21 3 259 2936Mobile: +92 21 322 - 222 4030

E-mail: [email protected]


Backups

Economy of the Pakistani Market


Pakistan Economic Review

• Pakistan economic review projects that because of strong economic policies taken up by Pakistan government manufacturing and financial services sectors have flourished since fiscal 2008.

• Export of goods is a major concern for Pakistan economy. From 1999, exports of Pakistan have increased from $7.5 billion to $18 billion in financial year 2007-2008.

•• Major items for exports include cotton fiber, vegetables, rice, electrical appliances,

furniture, cement, tiles, marble, textiles, clothing, sports goods, powdered milk, livestock meat, software, seafood, leather goods, surgical instruments, carpets, rugs, ice cream, chicken, wheat, processed food items, Pakistani assembled Suzuki cars, salt, defense equipment, onyx, marble and engineering goods to mention a few.

• Economic review of Pakistan has been focusing in recent times on how to deal with economic recession.

• Economic indicators look positive in present situation.

• Discount rate of central bank has been improved to 1.5 percentage points.

• Pakistan economic review projects that government encourages foreign investments in various fields of real estate, telecommunications, software, energy, fertilizer, aerospace, textiles, steel, ship building, arms manufacturing, cement and automotives

Backup


Key Economic Indicators (2008 to 2010)

Source: State Bank of Pakistan (SBP)Federal Bureau of Statistics (FBS)Federal Board of Revenue (FBR)www.brecorder.com www.kse.com.pk

Indicators 2007-08 2008-09 2009-10 2010-11Exports(Billion $)

19.22 17.79 19.63 27.80(May)

Imports(Billion $)

39.96 34.82 31.05 38.91(May)

Trade Balance(Billion $)

-20.74 -17.03 -11.42 -11.11

FDI(Billion $)

5.15 3.72 2.21 1.5736

Foreign Investment(Billion $)

5.19 2.67 2.14 1.9181

Worker Remittances(Billion $)

6.5 7.81 8.91 11.201

Forex Reserves(Billion $)

10.83 12.23 16.07 18.25

Exchange Rate(Rs. / US$)

71.0 88.90 86.21 85.95

GDP Growth 5.80% 2.10% 4.10% 4.10%

Inflation 10.30% 13.10% 12.90% -

Backup


GDP 2009 to 2012 / Growth by Main IndustryBackup


Pakistan Economic Structure

• Characterized as semi-industrialized, Pakistan’s economy has grown tremendously since its independence in 1947.

• Punjab region and Karachi constitute the major share in the economic growth of the country.

• The first decade of the 21st century has experienced wide-ranging economic reforms particularly in manufacturing and financial services sector, leading to improvement in the country’s economic outlook.

Pakistan Economic Structure: Primary Sector• Pakistan’s primary sector plays a major role in the country’s economy. • Primarily an agrarian economy, Pakistan produces a range of agricultural products. • Around 43% of the country’s labor is engaged in the primary sector, which in turn contributes

20.8% to the country’s economy in 2009. • Pakistan is the second largest producer of Chickpea and the third largest producer of mango

in the world according to the 2005 FAO of the UN. • Some other major agricultural products of Pakistan include onion, cotton, rice, tangerines,

oranges, apricot, sugarcane, date palm, Clementine and wheat. • Dairy farming is also a large industry in Pakistan. In fact, Pakistan is the fifth largest milk

producer in the world.

Backup


Pakistan Economic Structure

Pakistan Economic Structure: Secondary Sector• Pakistan’s manufacturing sector provides employment to 20.3% of the country’s labor force

(est. 2005). • Some major manufacturing industries include cotton textile and apparel manufacturing,

carpets, rugs, rice, chemicals, sports goods and leather goods. • Some other popular industries are construction materials, mineral, paper products, food

processing and beverages. • Around 51.4% of country’s exports include textile and apparel. • The secondary sector experienced a growth of 5.4% in 2007-08. However, electricity shortage

remains the biggest challenge in ensuring development of Pakistan’s secondary sector.

Pakistan Economic Structure: Tertiary Sector• The services sector of Pakistan mainly includes industries such as finance, insurance,

transport, communications and storage that account for 24% of the country’s GDP. • Wholesale and retail trade has 30% share in the GDP. • With increase in the country’s software exports, the IT industry is emerging as a flourishing

service industry. • Despite union unrest, the Pakistani government is actively engaged in privatization of banking,

telecommunications and utilities to produce more jobs in the country.

Backup


Growth by Main Industries-Real GDP (Commodity Producing Sectors)

Year 2008-09R 2009-10P

A) Commodity Producing Sector 2,555,948 2,646,845

I. Agriculture 1,195,031 1,218,873

Crops 537,087 534,737

- Major Crops 400,486 399,729

- Minor Crops 136,601 135,008

Livestock 622,531 648,106

Fishing 21,319 21,626

Forestry 14,094 14,404

II. Industry 1,360,917 1,427,972

Manufacturing 997,966 1,049,569

- Large-scale 664,405 693,355

- Small-scale* 333,561 356,214

Mining and Quarrying 137,707 135,411

Construction 112,884 130,203

Electricity & Gas Distribution 112,360 112,789

Backup


Growth by Main Industries (cont‘d)Real GDP (Services Sector)

Year 2008-09R 2009-10P

B) Services Sector 2,892,089 3,023,923

Wholesale & Retail Trade 921,015 968,150

Transport Storage & Communication 554,115 578,966

Finance and Insurance 314,813 303,521

Ownership of Dwellings 150,629 155,916

Public Administration & Defence 332,108 357,134

Community, Social & Personal Services 619,409 660,236

GDP at Factor Cost (A+B) 5,448,037 5,670,768

Backup

Documents

Pakistan\'s Economic Outlook