As current trends indicate, the re-balancing of the national economy is being driven by domestic impulse: whether it is a widening range of demands or investment inflow in the CPEC projects — badly needed to fill infrastructural and energy gaps.

The current approach to economic growth is different from the expansion pattern set by the financialisation of the global economy; at a time when the international market was awash with excess liquidity and many foreign banks were entering the Pakistani market. This was during Shaukat Aziz’s tenure, first as finance minister and then as prime minister.

The focus was on development of capital market, banking and telecom sector which alone recorded robust growth. Even energy sector which fuels economic growth was neglected.

Since then the number of listed companies has droped sharply.

Many of banks left following the global financial crisis of 2007-08 and their assets were taken over by local peers. Their exit is providing local banks with a much greater share in financing the needs of the domestic economy.

The current approach to economic growth is different from the expansion pattern set by the financialisation of the global economy

The latest foreign bank to quit would be NIB which is being acquired by MCB. Banks are investing heavily in government papers and the process of consolidation is still continuing. Sindh and Summit Bank are in talks for a possible acquisition/ merger.

Acquisitions, mergers and joint ventures in non-bank and non-financial companies are attracting foreign investment because of their domestic business potential and not for exports. Foreign firms operating in Pakistan are ploughing back a significant portion of their earnings in investment, which today contributes nearly 40pc of the country’s total direct foreign investment.

According to current market indicators, transactions for acquisitions, mergers and joint ventures appears to be picking up. The Abraaj Group, which has just decided to off-loaded its stakes (after a turnaround) in K-Electric , announced last week that it had entered into partnership with Islamabad Diagnostic Centre which plans to expand its network from the existing 20 to 50 centres across Punjab in the next five years.

Generally M&A’s occur because people are supposed to add value to a business, enhance competitiveness and increase market share. But this exclusive approach is not enough to ensure an M&A’s success.

In a talk on ‘succeeding at M&A through confluence’ organised by TerraBiz, chairman of the US based ConfluCore, LLP Usman A. Ghani criticised the M&A mania in developed economies of the West where the success rate was only two in ten cases.

Ghani says that M&A should not be treated as a transaction but a journey to a higher level of all round performance. Such a move requires understanding of the dynamics of integration and a strong focus on how it will be steered towards a successful conclusion.

Mr. Ghani is of the view that for an M&A to be a success it should also create value for customers and enhance employees’ intellectual capacity through training. The M&A strategist does not subscribe to the concept of ‘human capital’. He says that capital — plants and machinery — depreciates over time but intellectual capacity increases with age, training and skills.

The general impression is that M&A activity in Pakistan is merely focused on acquisition.

Back to the domestic impulse issue, the State Bank of Pakistan’s quarterly report says the GDP growth of 5.7pc targeted for FY2017 is “expected from a rebound in agriculture and increased share of industry.”

Both the federal and Punjab government took a series of steps to pull the crop sector out of stagnation. And the growing food processing industry is also providing some support to the livestock and crop sector.

Though the growth of the large scale manufacturing sector is sluggish, the central bank is perhaps pinning hopes on the recent surge in imports of machinery for balancing, modernising and replacement by the manufacturing sector and for the CPEC-related projects.

In the first quarter of FY2017, machinery worth Rs285.4bn was imported in addition to Rs8,894bn in the whole of the previous year. What is no less important is that the imports were primarily financed by investors though bank lending against fixed assets; another factor that is also rising simultaneously.

Surprisingly largescale manufacturing expanded 8pc in November.

As far as the CPEC projects are concerned, they will provide stimulus to a wide range of economic activities and also impart efficiency to commodity producing sectors, both in the realm of production and marketing.

The latest move to shore up export-oriented industries is the Rs180bn PM’s package for exporters.

And the World Bank has revised upwards the country’s growth rate to 5.2pc for this fiscal year.

Published in Dawn, Business & Finance weekly, January 16th, 2017