As we exit a tumultuous 2016 we asked industry leaders what they expect from the country’s economy in 2017. Our questions, and some of their responses, were:
Q1: There is a global movement towards protectionism. How do you see this affecting Pakistan’s economy?
Q2: 2016 saw many unexpected twists and turns in the political and economic environment. Based on the subsequent changes, which sectors of the country do you foresee as the major winners and losers in the New Year?
Chairperson and CEO, Unilever Pakistan Limited
1. “While Pakistan may not face immediate implications, our GDP does have major contributions from exports and remittances. In this backdrop, foreign investment assumes greater significance and this needs continuing improvement in the economic and security environment. Most importantly, local industry needs to step up cost efficiencies and quality standards in order to survive in this new competitive world”.
2. “With the CPEC taking shape and a possible end to the power crisis, economic outlook is positive. Major gains are already being seen by the service industry, construction sector and the auto industry with global players also entering the Pakistani market. The FMCG sector is also confident of growth being fueled by rising consumer confidence and expenditure.”
President and CEO, Bank Alfalah
1. Replacing decades of global free-trade with protectionism, will not be easy, comprehensive or quick. Protectionism will be resisted even by Western commercial interests. In the event that a degree of protectionism does take hold, Pakistan will largely escape the negative implications, as its economy is not as trade-dependent as most Asian countries.
2. Unlike many other countries, Pakistan’s economic outlook is quite bright. Aside from falling exports and stagnant remittances, our economy is supported by range-bound oil prices, the CPEC and a tangible improvement in security. Cement, steel, bulk chemicals, consumer durables, and the power sector should do well in 2017, but there are concerns about textiles, lost opportunities in agriculture, and the disadvantages facing companies that operate in the formal sector. There is a dire need to improve the documentation of Pakistan’s economy.
Dr Shahida Qaisar
Managing Director, Pharmatec Pakistan
1. Since Pakistan’s pharmaceutical industry has not been granted a price increase since 2001, we rely heavily on exports. With a global movement towards protectionism, our exports will suffer in the global market, due to a higher level of competition. With low domestic prices, and high competition abroad, profit margins have been sinking rapidly. If we see no change, the Pharmaceutical Industry in Pakistan has a grim future.
2. With the initiation of the CPEC this year, Pakistan’s economy will benefit vastly due to better infrastructure, which could lead to a higher rate of employment.
Mohammad Ali Tabba
Chief Executive Officer, Lucky Cement
1. Pakistan is one of the most liberal countries when it comes to imports. There are numerous challenges in the manufacturing sector and one of them is the very liberal import policy. Also, because of local protectionism our exports will continue to suffer while the import bill will continue to rise. Unfortunately when this thorny issue is discussed with the relevant government departments, their view is that the local industry needs extra protection to increase profitability.
2. All those industries catering to domestic consumption are doing relatively better. Inversely, export oriented sectors are the biggest losers since the cost of doing business in Pakistan is one of the highest in the region and from a global perspective — we are uncompetitive.
Dr Zeelaf Munir
Managing Director and CEO, English Biscuit Manufacturers
1. The global movement for protectionism will be another challenge to our export industry which has declined. Higher cost of production, lack of energy, institutional support and R&D remain major challenges. Trade, as opposed to protectionism, leads to the domestic industry becoming competitive and able not only to defend its domestic market share but also compete in regional and global markets. However, for this competitiveness to develop, the industry needs a level playing field in its own markets. In Pakistan, domestic manufacturers have to contend with massive under invoicing, misdeclaration in imports and outright smuggling.
2. Given the country’s huge market base and rapidly growing middle class, I believe practically all consumer goods sectors will continue to do well in 2017. However, the challenge of fiscal consolidation and tapping the undocumented economy which, by rough estimates constitutes at least the third of the documented economy, needs to be tackled more aggressively, in addition to the thriving counterfeit and intellectual property infringement sector. Otherwise the documented sector will be the loser and others will be the winner due to competitive imbalance.