Some Historical Facts and the way forward
(by: Kalim Farooqui) As we celebrate 70th Independence Day of Pakistan, it is appropriate that we take stock of what Pakistan was, what it went through in recent decades and what we can hope for in the future. It came into being on 14th of August 1947. This was the period when the World War II has just recently ended and many nations from Japan in the East to Germany in the West were rebuilding themselves from the ravages of war, which besides taking numerous human lives, was also a major setback to their economies.
Laurels were earned by the founding managers of our country in every field since they had struggled for Pakistan and were very much on track with the teachings, wisdom and the vision of the Quaid, Mohammed Ali Jinnah had for the newly found Pakistan. It is common knowledge that Pakistan’s economy in the 50’s and 60’s was amongst the fast growing in the world and the most recognized in Asia. Amongst the facts known are that it was Japan which partnered with Pakistan in their initial growth seeking supplier’s credit from Pakistan to buy jute and raw cotton and in turn supply textile machinery, later. This was in view of the fact that textile was the only industry allowed to revive under Japan’s occupation which ended in 1952 after the World War and its sovereignty fully restored. Pakistan had sent its first trade mission to Japan under Mirza Abul Isphahni as early in September 1948 to review Japanese textile industry for Pakistan’s benefit. Few would know that the only Head of State ever to be received at the airport by the Emperor of Japan himself at the time, was the President of Pakistan, Ayub Khan. Pakistan played a significant role during 1947-51 in lifting the Occupation and restoring of Japan’s Sovereignty. Pakistan was known as the “tower of strength” on the Japanese peace treaty signed on September 8th, 1951 at San Francisco as was stated by the then US Secretary of State John Foster Dulles. Unlike many countries, Pakistan waived off war reparations to Japan to help build its economy. Pakistan was among the first few countries that had ratified the Japanese peace treaty. The second bank branch ever internationally opened by Japan, The Bank of Tokyo, was in Karachi in 1955 since by then almost 50 Japanese entities were already operating in Pakistan leading them to also open their third overseas office of the Japan External Trade Organization (JETRO); also in Karachi. JETRO has now 73 overseas offices in 55 countries. It was Sir Zafar Ullah Khan, Pakistan’s Foreign Minister and the first Asian at the time to preside over the UN General Assembly and the International Court of Justice, who supported the application of Japan for entry into the United Nations. Japan reached the status of being the world’s second largest economy in the world.
The neighboring South Korea consulted Pakistan and it was the Planning Commission of Pakistan with Dr. Mahboob Ul Haq, which helped them with their development plans. South Korea is now the 10th largest world economy, 5th largest exporter and a member of the G20. It has a nominal GDP of $ I.5 Trillion with $500 Billion in exports. Malaysia was not far when the constitutional experts from Pakistan extended their help in making up the Malaysian constitution. Japan, Korea, Malaysia, Singapore, Indonesia and others in the region, all looked up to Pakistan for cooperation in diversified fields extending from economic cooperation to defense collaboration and with their Heads of States and Governments as regular visitors to Pakistan. Pakistan was also instrumental in setting up airlines from their progressive experience with Pakistan International Airline. Amongst these is EMIRATES considered today as amongst world’s best whose first flight was from Dubai to Karachi flown by a Pakistani pilot, Captain Fazal Ghani, on 25th October 1985 with in flight service attendants also trained in Pakistan. Pakistanis also contributed towards setting up of insurance companies and banks abroad leading them to be major players in the capital markets of the world and specially in the Middle East. The steep rise of the Bank of Credit & Commerce International (BCCI) established in cooperation with Abu Dhabi Government in 1972 and spearheaded by a Pakistani Banker, Agha Hassan Abidi, is a classic example.In a short span, it had 400 branches in 78 countries with assets more than $20 Billion. Earlier, Habib Bank (AG Zurich) established in 1967 by the House of Habib of Pakistan has recently been counted as the 4th Most Sound Bank amongst the 312 operating in Switzerland today and with country ranking at 27 & with return on assets at 2nd position. It is counted amongst the Top 1000 banks operating and placed at 648.
The scenario with respect to Pakistan in the West was no different. Heads of State and Governments from Pakistan were received at the airports by the Presidents of the likes of United States and driven in cavalcades through the streets with the residents chanting and carrying Pakistani flags. Ayub Khan being personally received by John Kennedy at the airport and being presented with guard of honour on July 11th, 1961 and being together driven through the streets amidst flag chanting Americans in New York and Washington is still vivid in the memories of many who witnessed. The growing potential and importance of Pakistan in the region was the key factor for Pakistan becoming member in the likes of South East Asia Treaty Organization (SEATO) of 1954 and Central Treat Organization of 1955 (CENTO). Pakistan was amongst the select few countries to be included in such very important pacts and treaties by USA to play its evolving role in the region and specially in Asia for being an emerging country pursuing pertinent policies as a country should. USA was a major contributor to fund two major dams, Mangla and Tarbela which accounted for almost 70% of the country’s power output at the time.
It was in 1961 that the first state visit ever by a Pakistani Head of State was made to meet his counterpart in Germany who recognized Pakistan as an example of successful development policy in a developing country and partnered with Pakistan to launch an industrial development program; hence becoming one of the first economic partner of Germany. It may even surprise many that Pakistan, in 1963 had loaned 120 Million Rupees to Germany for development when the parity of the then Deutsche Mark was below the Pakistani Rupee. According to the Gazette notification of Pakistan of October 13th, 1950, the value of British Pound Sterling was 9.5, US$ 3.5 and with all European currencies below par with even German Mark at 0.75 to the Pakistani Rupee. Bilateral cooperation was followed by a prolonged and heavy industrial program by Germany to aid Pakistan in its industrial growth, attracting many multinationals from Germany to benefit from Pakistan’s emerging economy such as SIEMENS and BASF.
It was unfortunate for the country to have gone through an extremely bad patch extending for over 2 decades because of regional turmoil and uncertainties. First on account of the Soviet invasion of Afghanistan and thereafter getting involved with the global war on terror after the 9/11 incident in America; not to mention the Iran-Iraq war lasting 8 years in the neighborhood. Pakistan had become the front-line state fighting in both cases resulting in human losses of over 50 thousand innocent lives and billions of dollars in terms of economic losses. Pakistan had also in the meantime, denoted nuclear devises to counter the threats from India and in doing so faced sanctions which took a heavy toll on the economy. This is the period when Pakistan faced severe difficulties in overcoming the impediments that were created.
Located in South Asia with an area of over 800,000 km and with a coast line of 1100 km, Pakistan borders Iran, Afghanistan, China and India. It also provides the economic corridor to the newly created States of Central Asia which too is a market of nearly 70 million people. As such, doing business in Pakistan means having possible access to almost 270 Million. Major exports from Pakistan include cotton and textile goods, sea food, rice, leather, sporting and surgical goods, carpets, fruits and vegetables; the collective volume of which is in excess of U.S. $ 25 Billion annually and with a GDP of $300 Billion with 5.3 % growth and standing as an economy, at 25thth position in the world in terms of purchasing power parity. More than 500 Multinational Companies (MNC’s) are operating in Pakistan and include world icons such as Unilever, Nestle, Honda, GSK, Toyota, Standard Charter, Suzuki and the list again continues with fresh entrants like Samsung, Ajino moto, TESCO and Morinaga.
Pakistan is blessed with abundant natural resources which, besides ample virgin land, has copper fields, salt ranges, coal mines, gas reserves and the like and consequently has well established industrial base for textiles, cement, fertilizer, steel, sugar, engineering goods, leather and the list continues with industrial units providing value added goods. Information Technology exports from Pakistan is witnessing a 40% growth each year with current export at $3 Billion. The availability of skilled professionals, an appropriate IT infrastructure and affordable rates for connectivity result is making Pakistan a choice destination for a significant number of international companies looking to relocate their operations offshore. English being the official language, many business houses from around the world use call centers in Pakistan for their client linkages being conveniently located at +5 GMT time zone. There are around 500 call centers with expertise in both inbound and outbound calling including technical support and tele-marketing. Amongst its paramount resource is its youth with almost 60% under the age of 30 years. No wonder that World Startup report, a US based organization in the Silicon Valley where 12,500 Pakistanis are already employed, while evaluating countries of the region, points to the fact that Pakistan is the most favored destination for starting new businesses. According to them, Pakistan has 30 million internet users, 135 million Mobile subscriptions, 7 million smart phone users with almost 15 million face book users; all in recent years. Additionally, the number of 3G &4G users in Pakistan has reached over 42 million with number of broadband subscribers reaching 45 million. According to the World Bank figures, Pakistan stands at the 7th position in respect of foreign investment. Free Trade agreements are in place with Malaysia, China and Sri Lanka while with South Korea and Iran are being negotiated and is expected to be soon finalized.Talks with Thailand are due this month on and expected to be signed in September. Additionally, Pakistan is committed for finalizing FTA with Gulf Cooperation Council to enhance the multilateral trade. Besides, businesses in Pakistan can now also eye the Iranian market which after decades of sanctions is opening-up and having a market base with a population of 80 Million and proven oil reserves of nearly 1.5 Billion barrels; allowing Iran to start trading with the outside world and in return meet its need for the critically needed infrastructure and other requirements necessitating foreign exchange. Iran and Pakistan are looking at Bi-Lateral trade to achieve $5 Billion annually.
According to Goldman Sachs investment bank and economist Jim O’Neill in a research paper has identified Pakistan amongst one of the Next Eleven countries having a high potential of becoming, along with the BRICS, the world’s largest economies in the 21st century. A recent article in the FORBES by Daniel Runde & titled “The Next Columbia Success Story?” start by saying, “Pakistan has the potential to be a global turnaround story”. Niekki of Japan and the most widely circulated in businesses in Japan have regularly started writing on Pakistan and also including snapshots of leading business icons of Pakistan. Their assumption is based on the promising outlook for investment and future growth for reasons of increasing middle class with swelling purchasing power, economic liberalization which includes long awaited privatization of public sector corporations, decrease in budget deficits and gradual increase in foreign currency reserves and above all the marked improvement in the law and order of the country. While law is taking its own course with an independent and effective judiciary, order towards good governance is bound to surely set-in since accountability at all levels is being seriously pursued. The upward economic trajectory being coupled with the enforcement of fiscal discipline by the powers that be, is sure to set the stage for Pakistan’s resurgence as a destination for foreign investors to reckon with.Such factors have also compelled Standard and Poor’s to continually review and improve their ratings on Pakistan.
Above all and in andwhat is termed as China Pakistan Economic Corridor (CEPC), China has agreed to invest more than 50 Billion Dollars for infrastructure improvement and towards which, no less than the President of China himself visited Pakistan in 2015 to witness the signing of agreements in different sectors which included roads, highways and energy. This single phenomenon is being viewed to be the game changer for Pakistan in the days ahead since the Government of Pakistan has also made plans for 30 Special Economic Zones (SEZ’s) to be built alongside inviting foreign investors to benefit from the packages being announced by different provinces. In addition, the Chinese Government held a meeting in Beijing in May this year attended by nearly 70 countries and International Organizations for the “Belt and Road” Forum (OBOR). The plan identifies 65 countries along the Belt and Road. 44 nations were represented with 20 Heads of State present themselves including the Pakistan’s Prime Minister. Pakistan stands to greatly benefit from this Chinese “Silk Road” initiative allowing connectivity for the extensive corridor planned to cater to 62% of world’s population and 30% of its economic output.
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