PAKISTAN’s once-resilient business community is fast losing hope, as it appears to be suffering from the ‘ostrich syndrome’. The term is generally used to describe people who refuse to recognise something that is pretty obvious.
Meanwhile, both the public and the private sector are increasingly shying away from global business events, which they could have used to showcase Pakistan’s potential as an emerging market.
With direct investment falling to its lowest levels, and its corresponding impact on the GDP for everyone to see, there is a need for leaders to recognise that the country now needs global exposure more than ever.
There is no doubt that major crises, like power shortage and deteriorating law and order situation, are a cause a huge loss of productivity. This, in turn, makes Pakistan lose its competitiveness, credentials and reliability. All of this, then, has a negative impact on investors’ confidence.
With the public sector suffering from bad governance, even private sector business leaders are not doing service to the country as they shy away from global business events. At global product exhibitions, they are hesitant to secure big orders, perhaps because they fear non-compliance. Instead, they seem to be satisfied at the minimum sustainable level, and hope for better times to come.
The ones who are convinced that this is not going to happen in their lifetime are either packing up altogether, or else move to markets abroad, which offer them a relatively better playing field.
The World Economic Forum conference at Davos, Switzerland, this year, was marked by an imposing presence of several emerging market countries, who were eager to register themselves as potential baskets for foreign investment. Particularly significant was the overwhelming presence of political and business leaders from India, Malaysia, Indonesia, Philippines, and Thailand. These leaders showcased their countries’ potential by actively participating in business, social and cultural events that were organised along the sidelines of the conference.
Current global economic trends show that emerging markets would influence future business and strategic decisions of international investors, as the latter shift their attention away from developed markets. In the meantime, rapid urbanisation and a growing middle class are driving emerging market economies. It is projected that by 2025, the annual consumption of these economies would rise to $30 trillion, whereas around 50 per cent of all the world’s top economies, in terms of GDP, would be located in Asia.
In their quest for foreign investment, emerging markets are rapidly upgrading their infrastructure, and increasing the productivity of their low-cost labour force. These countries are also doing their best to lower the cost of doing business for foreign investors. They also boast growth rates that are around double of that of developed economies.
Pakistan was recognised as an emerging market country that had the third highest GDP growth rate in Asia, in 2007. It also competed well with other economies in attracting foreign investment. However, during the last five years, it appears to have held back from global competition. It had also once been a regular and a notable participant at World Economic Forum meetings in Davos, where it reaped significant political and business mileage. However, only a few private sector business leaders from the country attended the conference this year.
We cannot afford to be left out from availing the benefits of investors’ shift of focus from developed to emerging markets. This is a unique window of opportunity, expected to last for a decade or more, during which countries, that are aggressively competing in the global arena, would be able to secure the path of prosperity for their people.
We have a geographical advantage, as well as natural resources, abundant manpower and other inherent potentials, that can qualify us as an emerging market country. And these characteristics can help our country regain its lost position in the global economic spectrum.
And there is no dearth of success stories of foreign entities that make it big after investing here. Many multinational firms have achieved profitability and growth at much higher rates in Pakistan than their counterparts in other emerging and developed markets.
However, there is hardly any doubt that a major deterrent to foreign investors is the worsening law and order in the country, which seems to have no end in sight. Also, it seems that the complexity of the situation is beyond the comprehension of business leaders, government functionaries as well as the political leadership.
While many emerging markets are experiencing similar problems, perhaps they are not of the same dimension and complexity as Pakistan does. However, through global exposure and consistent networking, they manage to dilute the adverse effects of such situations.
Our business community needs to regain its resilience, and play a more proactive role both inside and outside the country, to compensate for the inefficient government.
The writer is the Director of EMR Energy