Our comprehensive assessment of Pakistan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Pakistan, as well as the latest industry developments that could impact Pakistan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Pakistan before your competitors.

Country Risk

Pakistan Country Risk

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Core Views:

  • Pakistan's economy continues to show signs of promise amid the ongoing drawbacks of an energy crisis, systematic terrorist activity, and a high fiscal deficit, driven in part by the costs associated with the former. Investment spending, which has underperformed headline real GDP growth for several years, declining to around 15% of GDP at present, looks likely to accelerate over the coming years. At present, Pakistan has the lowest investment rate in the whole of Asia, reflecting more than anything else the low national savings rate in the economy. Over the coming years, efforts undertaken by the government, with the assistance of the IMF, should help to boost the domestic savings rate, freeing up resources for investment.

  • Pakistan's parliament has approved a relatively business friendly budget for fiscal year 2014/15 (July-June), which should see the fiscal...

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Pakistan Operational Risk Coverage (9)

Pakistan Operational Risk

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Pakistan is a very high risk country in absolute, regional and global terms, particularly because of the country's extremely unstable security situation. Its overall Operational Risk score is depressed by a number of factors, namely its large uneducated labour force, poor logistics network owing to an overdependence on road freight, endemic corruption, and the ongoing threats to national security posed by the presence of a large number of terrorist networks and long-term tensions with neighbouring India over Kashmir. For these reasons, Pakistan receives a low score of 31. 2 out of 100 in our overall Operational Risk index, putting it in 2 8 thposition out of 30 countries in Asia. That said, the country's far-reaching road network and developed banking system provide...

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Pakistan Crime & Security

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Crime and security risks to foreign investors are very high in Pakistan, owing to the high incidence of violent crime in the country, the prevalence of terrorist networks, and the ongoing threat of war with India. There is an ongoing risk of terrorist activity in the country, and Pakistan plays host to a number of international terrorist networks, most notably al-Qaeda, which pose a direct threat to foreign workers. The threat is exacerbated by the underfunded and corrupt nature of Pakistan's counter-terrorist and police forces, and, crucially, the perceived role of the Pakistani authorities in supporting various terrorist networks. Finally, there remains in Pakistan an existential threat of war with India. While we do not expect this to jeopardise foreigners in the short term, it remains a concern for businesses operating in the country, particularly around the disputed border territory of Kashmir. For these reasons, Pakistan scores 9.0 out of 100 for overall...

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Pakistan Labour Market

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Pakistan is one of the poorest regional performers with regards to Labour Market Risk, with very low basic skills levels and high costs of employment. Very low secondary and tertiary enrolment rates are further significant impediments to the development of a workforce capable of skilled, technical labour, which may result in the need to import skilled labour, incurring high employment costs. Pakistan's overall score for Labour Market Risk is 37.3 out of 100, above only Afghanistan of the 29 counties in Asia.

Availability Of Labour risks are severe for Pakistan, and the worst implication stemming from this is the higher wages for potential employers, particularly in skilled professions. Around half of Pakistan's workforce lack the skills and literacy to offer investors anything but the most basic manual work. This is reflected in the country's very low score of 18.7 out of 100 for Availability Of Labour, putting it above only Timor-Leste and...

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Pakistan Logistics

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Pakistan has a very underdeveloped logistics network, suffering from a lack of government investment in its transport network and utilities sectors. Poor access to key utilities such as water, internet, fuel and electricity remain an ongoing operational risk to businesses. Furthermore transport risks continue to rise as the deterioration of the rail network increases pressure on the country's roads, causing congestion and disruption to supply chains. For these reasons, Pakistan receives a low score of 48.9 out of 100 for overall Logistics Risks in the BMI Logistics Risk Index, putting it in 17 th position out of 29 countries in Asia.

Pakistan's negative growth prospects represent a considerable deterrent to investors. Nevertheless, the country's considerable market size and vast regions of untapped resources mean that opportunities for investment will remain. Poor access to key utilities such as water...

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Pakistan Trade & Investment

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Trade and investment risks are very high in Pakistan owing to the country's high fiscal and trade barriers and the extent of red tape plaguing its bureaucracy. Compounded by the volatile domestic security situation, foreign investment outflow in recent years has slowed, a trend we expect to continue in the foreseeable future. That said, the country's developed banking system provides good access to international financial markets. For these reasons, the country has an overall score of 29.5 out of 100 for Trade and Investment, putting it in 23 rd position out of 29 countries in Asia.    

Following a sharp rise in Foreign Direct Investment (FDI) in Pakistan from the mid-1990s to the mid-2000s, since 2008 it has slowed significantly, and currently accounts for just 11.8% of Pakistan's total GDP. For the most part, inconsistent economic policies, high fiscal and trade barriers, high...

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Pakistan Industry Coverage (16)

Agribusiness

Pakistan Agribusiness

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BMI View:   Pakistan's vulnerability to flooding has been highlighted again this September, leading us to revise down our previously positive forecasts for rice and cotton. Ironically, a shortage of water was also a problem in the earlier part of the summer.   Despite this setback, rice exporters should enjoy better prices for their products in the coming years of our forecast period with basmati undergoing a revival which we see continuing to gather momentum if a barter deal can be concluded with Iran. The wheat harvest was completed well before fields were flooded with minor damage to a small percentage of the harvest due to inadequate storage. The sugar industry continues to be troubled by disputes between growers and millers, although there may be grounds for optimism if the government's concessions on export deposits allow...

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Autos

Pakistan Autos

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We believe that policies drawn up in the new federal budget will support the domestic auto industry, by creating conditions for stronger sales. The new budget, coupled with our upbeat forecast for private consumption and gross fixed-capital formation in the country, bodes well for both passenger cars and commercial vehicles (CVs). While we have maintained our forecast for passenger vehicles, we have revised our CV sales growth forecast to 9.4% in FY2014/15 (July-June) from 4.5% previously, bringing our overall auto sales growth forecast to 4.8%, up from 4.0% previously.

According to the Pakistan Automotive Manufacturers Association (PAMA), domestic auto sales (includes passenger cars, trucks, buses, light commercial vehicles, vans, and jeeps) for September rose 11.3% year-on-year (y-o-y). In line with what we have highlighted previously, the removal of the 10.0% Federal Excise Duties (FED) on domestically produced motor vehicles above 1,...

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Commercial Banking

Pakistan Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Pakistan Consumer Electronics

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BMI View: Pakistan continues to present major challenges to vendors, and underperform its potential due to a number of economic, social and political risks. However, the large population and rising incomes means there are still opportunities for vendors. Although political and security concerns remain, the economic environment is supportive of expansion, with rising incomes, consumption growth, and e ncouragingly, private sector credit growth h as also recovered from its recent trough. The opportunity provided by the large population and economic environment has been sufficient to attract investment from multinational consumer electronics...

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Defence & Security

Pakistan Defence & Security

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BMI View: We expect an escalation in domestic security threats though 2015 in response to the NATO withdrawal from Afghanistan, the ongoing military offensive in the Federally Administered Tribal Area (FATA), and rising tensions with Indian forces along the Jammu Kashmir border. The Pakistan Government has increased military spending, and is investing in indigenous defence companies. They in turn are looking to increase capacity through international partnership, creating opportunities for foreign players. 

The security situation in Pakistan has steadily deteriorated through 2014. Last year witnessed regular terrorist attacks against military and civilian assets, including Karachi International Airport. This illustrates that domestic and international terror cells are well resourced and well trained, making them a credible threat to domestic and international organisations. Moreover, the NATO...

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Food & Drink

Pakistan Food & Drink

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We expect that Pakistan will become an increasingly important investment destination from a demographic point of view over the long term, provided political issues are addressed successfully. Pakistan's population is increasing rapidly, with the World Bank projecting it to exceed 200mn by 2022. Urbanisation rates are also increasing, albeit slowly.

Headline Industry Forecasts (local currency):

  • 2014 per capita food consumption growth: +10.1% year-on-year (y-o-y); compound annual growth rate (CAGR) between 2013 and 2018: +9.9%.

  • 2014 soft drinks volume sales growth: +2.9% y-o-y; CAGR between 2013 and 2018: +3.1%.

  • 2014 alcoholic drinks volume sales growth: +2.2% y-o-y; CAGR between 2013 and 2018: +3.8%.

  • 2014 mass grocery retail sales growth: +11.9% y-o-y; CAGR between 2013 and 2018: +...

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Freight Transport

Pakistan Freight Transport

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We have downgraded our full-year real GDP growth forecast for Pakistan for the current fiscal year (FY2013/14 [July-June]) to 3.4% from 4.0% previously, as the macroeconomic environment readjusts painfully due to a general tightening in fiscal and monetary policy. We continue to believe that this tightening in policy is necessary in order to correct the significant structural imbalances in the economy, which should eventually put the economy on a much stronger footing and thus higher growth trajectory over the medium-to-long term. As such, while we have revised our near-term growth expectations, we have kept our FY2014/15 growth forecast at 4.0%, which implies a strong bounce in economic activity following this year of transition.

Our recent downgrades centre on lowering our growth expectations for domestic private demand, namely private consumption and gross fixed capital formation growth. While the revisions made were fairly marginal, they...

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Infrastructure

Pakistan Infrastructure

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BMI View: We remain bearish towards the outlook for Pakistan's construction sector despite the change towards a more economically conservative government in 2013. This is because Pakistan continues to present several characteristics that are not conducive for construction growth - namely non-conducive monetary conditions, poor fiscal position, as well as considerable business environment and security risks. However, should Pakistan be able to resolve the weaknesses in its investment climate, the country's strong fundamentals - favourable demographics, good strategic location and high infrastructure deficit - do present considerable scope for construction activity.

Key developments include:

  • Pakistan's Ministry of Water and Power's National Energy Policy 2013-18 aims to reduce the country's dependence on expensive...

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Insurance

Pakistan Insurance

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BMI View: As is the case in previous years, it is very easy to identify points of weakness in Pakistan's insurance sector. Non-life penetration and life density - our key metrics - are at very low levels. Because of declining motor premiums, non-life penetration has been falling. The largest companies in each of the main segments are public sector entities that are manifestly less dynamic than their private sector rivals.

Over 90% of the population does not use life insurance. Only four multi-national insurers - MetLife Alico (in life), AIG (in non-life), Allianz (in health insurance) and Hollard (in life) consider it desirable to maintain a presence. Most of the non-life insurers are tiny companies with low retention ratios and low pricing power. None of the largest indigenous companies have scale in...

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Medical Devices

Pakistan Medical Devices

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BMI Industry View:   The Pakistan medical device market is small for a country its size. Domestic production is limited primarily to steel surgical instruments and the majority of the market is supplied by im ports. In 2013, BMI estimates that the medical device market wa s worth US$ 259.7 mn, or US$1. 4 per capita. The medical device market is expected to grow at a r easonable rate, with a CAGR of 6.3 % forecast for the 2013-2018 period.

Headline Industry Forecasts

  • ...

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Oil & Gas

Pakistan Oil & Gas

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BMI View : We believe Pakistan's oil and gas reserves will continue dwindling over the forecast period due to excessive utilisation and lack of significant discoveries. However, several recent exploration successes and government's efforts to incentivise exploration and production pose an upside potential to our projections and could mitigate the negative trend, especially towards the second half of our forecast period.

Headline Forecasts (Pakistan 2012-2018)
  2012 2013e 2014f ...

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Pharmaceuticals & Healthcare

Pakistan Pharmaceuticals & Healthcare

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BMI View: Pakistan holds great potential for pharmaceutical and healthcare companies , with the world's sixth largest population. However, poor medical infrastructure, low per capita incomes and the high levels of counterfeit medicines prevent the market from realising this potential. This leaves the majority of the population with out access to healthcare , save for Pakistan's elite class who can afford innovative medicines.  

  Headline Expenditure Projections

  • Pharmaceuticals: PKR209.43bn (USD2.06bn) in 2013 to PRK231.22bn (USD2.22bn) in 2014; +10.4% in local currency terms and +7.8% in US dollar...

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Power

Pakistan Power

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BMI View :   The Pakistan power sector is set to benefit tremendously from the Chinese government's decision to finance 14 power projects as this will significantly boost generation capacity despite a lack of investment from the private sector.

On August 8, Pakistan's Prime Minister Muhammad Nawaz Sharif announced that 14 power projects in the country had obtained funding approval from the Chinese government. The Chinese government agreed to provide loans to cover the project costs (up to 85% of the total cost) and help in the development of these projects. We believe that Pakistan's power sector is set to benefit tremendously from this and as a result have decided to revise our forecasts for the Pakistan power sector on the back of these developments. In particular, we have included into our forecasts, the 14 projects...

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Real Estate

Pakistan Real Estate

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BMI View: As an investment prospect Pakistan's commercial real estate sector remains undermined by weak regulation and a continually volatile political situation. However, with a steadying ec onomy and growing consumer base it is hoped the country may be ab le to use its position as a link between Middle East ern and Asian real estate markets.

The security situation and political uncertainty continue to be concerns regarding investment in commercial real estate and business expansion in Pakistan. However, there is significant potential for the sector should these concerns alleviate. Pakistan's location could stand it in good stead, were the political and...

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Shipping

Pakistan Shipping

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Broadly speaking, we are sticking with our modest projections for Pakistani port activity. Small adjustments have been made to account for new data releases and marginally stronger container traffic.

Despite Risks, Growth To Stay Around 4%

Pakistan's economy continues to show signs of promise amid the ongoing drawbacks of an energy crisis, systematic terrorist activity, and a high fiscal deficit, driven in part by the costs associated with the former. Investment spending, which has underperformed headline real GDP growth for several years, declining to around 15% of GDP at present, looks likely to accelerate over the coming years.

At present, Pakistan has the lowest investment rate in the whole of Asia, reflecting more than anything else the low national savings rate in the economy. Going forward, efforts undertaken by the government, with the assistance of the IMF, should...

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Telecommunications

Pakistan Telecommunications

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BMI   View:   Pakistan's telecommunications market is one of the most underdeveloped in the Asia Pacific region . The regulator has successfully auctioned its 3G licences,   paving the way for higher value-added services (VAS) to be introduced to the market. This leaves Pakistan with significant room for growth, although the potential might   only materialise in the medium-   to   long - term.

...

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