WASHINGTON: “Pakistan is a reform story like neighbouring India’s, but only better,” says Charlie Robertson, London-based chief economist at Renaissance Capital Ltd.

A financial news service, Bloomberg, which spoke to Mr Robertson and other experts for a report on Pakistan, notes that the Karachi Stock Exchange has continued to show progress; “shrugging off sectarian violence, bombings, killings and kidnappings.”

The benchmark KSE-100 index has advanced about 16 percent in the past 12 months, featuring among the world’s top 10 performers.

The experts Bloomberg spoke to presented a mainly positive outlook of the Pakistani economy, as did the International Monetary Fund.

An IMF report released on Thursday said that significant economic progress was within Pakistan’s reach.

“Macroeconomic stabilisation in Pakistan is well under way and the threat of a crisis has significantly receded,” the report added.

Earlier this week, Morgan Stanley’s Chief Investment Strategist David M Darst told a seminar in Karachi that with over 100 million people below the age of 30 aspiring to change their lives, the rise of Pakistan “is just a matter of time.”

In June, Moody’s Investors Service upgraded Pakistan’s sovereign credit ratings for the first time since 2008 but said stalling of the ongoing IMF programme or an unstable political environment would be credit negative.

The Bloomberg report notes that easing prices are also set to buoy consumer spending. Inflation in South Asia’s second-largest economy slowed each month this year through April as transport and food prices fell, prompting the central bank to cut the benchmark interest rate in May to the lowest level in 42 years.

Renaissance’s Mr Robertson told Bloomberg that Pakistan “is the best, undiscovered investment opportunity in emerging or frontier markets.”

He said he was basing his hopes on recent changes in Pakistan’s policies.

“What’s changed is the delivery of reforms — privatisation, an improved fiscal picture and good relations with the IMF,” he said.

Bloomberg emphasises this point by comparing two Karachi landmarks: An 8th century Sufi shrine in Clifton and “a gleaming” 62-storey high-rise, coming up right next door.

The report suggests that the focus has shifted from shrines to constructions with at least half a dozen projects springing up in the same neighbourhood.

The investors include Dubai’s Emaar Properties as well as local tycoons.

The report says that construction and infrastructural development are the primary drivers behind Pakistan’s emergence as a frontier market.

A frontier market is a developing country growing more rapidly than other similar economies but not big enough to be considered an emerging market.

The report points out that the construction sector in Pakistan grew at 11.3 per cent through fiscal year 2014-15, nearly double the 5.7pc target.

It notes that the present government has boosted infrastructure expenditure by 27pc to Rs1.5 trillion for fiscal year 2015-16 (FY16).

Cement producers DG Khan Cement and Cherat Cement have announced plans to expand, while steelmakers Amreli Steels Ltd. and Mughal Iron and Steel Industries Ltd. are raising equity capital.

Bloomberg data shows the cement industry has rallied 57pc over the FY15 — nearly thrice the benchmark target — with Maple Leaf surging 161pc, Fauji Cement jumping 81pc, and DG Khan making gains of 62pc.

“The construction industry is seeing a boom, and there is still juice left in the cement rally... Overall economic improvement has also helped,” said Chief Executive Officer UBL Fund Managers Ltd Mir Muhammad Ali.

The report says that Pakistan’s $46 billion deal with China for the China-Pakistan Economic Corridor includes $28bn in investments will also have a trickle-down effect.

A builder in Karachi Hassan Baskhi says, “Business has been very good, and there’s no doubt my work has tripled in five years ... There’s huge demand from the middle class for affordable housing.”

Inflation has shown a downward trend over the past twelve months, with the annual inflation for the just-concluded fiscal year resting at 4.53pc.

Published in Dawn, July 3rd, 2015

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