Pakistan\'s Economic Outlook

Pakistan’s Economic Outlook

“Tremendous Growth and
Investment Opportunities
on a Fertile Land”
By Mehdi Yasir

Protection notice / Copyright notice

Contents
Country Profile
Key Data
Economic Outlook
Energy Demand & Supply
Water & Infrastructure Demand
Development Outlook
GDP Growth 2009-2012
GDP Growth 2006 – 2011
GDP Growth 2010 – 2014:
Macroeconomic Indicators/Rolling Targets
Growth by main Industries
Special Programs by Government (incl. Infrastructure)
Sectoral Growth Programs
Public Sector Development Program (PSDP) 2011-12
PSDP Growth 2010-11 to 2011-12


Country Profile: Key Data

Name: Islamic Republic of Pakistan
Size of the country: 803,943 sq. km.
(310,527 sq. mi.)

Bordering countries:
Afghanistan 2,430 km, China 523 km,
India 2,912 km, Iran 909 km

Climate: Pakistan lies in the temperate zone. The climate is
generally arid, characterized by hot summers and cool or cold
winters, and wide variations between extremes of temperature at
given locations

Natural resources: petroleum, natural gas, Minerals and
Agriculture

Population: 187,342,700 (2011)
Population growth rate: 1.57%
Literacy rate: 49.9% (Male: 63%; Female: 36%)

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Country Profile: Economic Outlook (2010 est.)
GDP - real growth rate: 2.4%
GDP - composition by sector:
agriculture: 20.8%
industry: 25.2%
services: 54%
Industrial Production Growth Rate: 4.9%
Inflation rate (consumer prices): 13.4%
Budget 2011-12:
revenues: $28.6 billion
expenditures: $32.1 billion
LD T
Industries:
Traction
Textiles and apparel, Food processing, Pharmaceuticals, Construction,
Materials, Paper products, Fertilizer, Shrimp, Cement, Sugar, Water,
Shipbuilding, Infrastructure, rice, leather goods, sports goods, chemicals,
manufactures, carpets and rugs
Agriculture - products:
wheat, rice, cotton, sugarcane, tomatoes, melons, dates, fruits, citrus; mutton,
Page 4 chickens, eggs, milk Protection notice / Copyright notice

Country Profile: Energy Demand & Supply
The Biggest Challenge & Opportunity:
Electricity - Demand: 17,428 MW (June 2011 Avg)
Electricity - Supply: 13,632 MW (June 2011 Avg)
Demand-Supply Gap: 3,796 MW (June 2011 Avg.)

Ever increasing Energy shortfall provides an
opportunity for LD DW Business
Gas being the most expensive source of Energy,
Energy Efficiency and Conservancy is a Focus
Electricity sources:
Oil, Coal, Hydel, Thermal, Nuclear
and LPG


Country Profile: Water & Infrastructure Demand

Pakistan suffers from a dearth of infrastructure in the water,
irrigation,; infrastructure which is essential for sustained growth and
competitiveness both in the local and international markets. The gaps
between demand and supply in these sectors are alarming.

Without adequate irrigation resources, power, and transport
infrastructure, the very sustainability of Pakistan as an independent
nation may be at stake as shortages could lead to increased social
discontent and disharmony amongst the federation and the provinces.

Pakistan is on the list of the most water stressed countries in the world,
and forecasts indicate that available resources are depleting rapidly,
possibly leading to a state of water scarcity in the next two decades.

Much of the water infrastructure is in poor repair and Pakistan has to
invest almost Rs60 billion (US$1billion) per year in new large dams
and related infrastructure over the next five years.

Source: World Bank Report – Pakistan Infrastructure Implementation Capacity Assessment (PIICA)


Country Profile: Water & Infrastructure Demand

Poor infrastructure services result in constrained economic activity
and reduce the country’s growth potential. Elasticities of business sector
output and productivity with respect to public core infrastructure
investments are usually much higher than that of private business
investments.

The GoP’s ability to plan and deliver infrastructure projects
effectively will determine the future pace of growth of the country.
According to the World Economic Forum Survey (2006-07) of 125
countries, Pakistan ranked 67 in basic infrastructure category.
Historically, the balance between demand and supply of infrastructure
facilities has faced a chronic imbalance. For instance, the aging and
inadequate irrigation and water infrastructure deficit alone is
estimated at Rs4 trillion (US$70 billion) and Pakistan needs to invest
almost Rs60 billion (US$1 billion) per year in new large dams and
related infrastructure over the next five years.



Development Outlook: Water & Infrastructure

The GoP has responded to this demand by planning extensive
infrastructure expansion.

The federal Mid Term Development Framework (MTDF),
allocates Rs2,162 billion (US$36 billion) to the development
of large

infrastructure—embarking on an ambitious program to upgrade
roads, railways, air, power, water and irrigation and other
infrastructure. Of this, Rs. 993 billion (US$16.3 billion) will be
through the Public Sector Development Program (PSDP).

The MTDF envisages a tripling of the infrastructure PSDP
from an average of Rs150 billion per year to Rs440 billion per
year. The current FY11 PSDP allocation of Rs 730 billion has
already eclipsed this target.



Development Outlook: Construction Industry
A Growth Engine for Host of Industries and Services



Development Outlook:
Government's Vision 2030 - Energy for Growth

Source: Planning Commission, GoP


GDP Growth 2009 – 2012:

GDP Growth 2006 - 2011

Pakistan’s Growth Performance-A Comparative

Source: World Economic Outlook, June 2011; Annual Plan 2011-12


GDP Growth 2010 - 2014
Macroeconomic Indicators/Rolling Targets


Growth by Main Industries:

Economic Growth:
GDP growth for 2011-12 is
projected at 4.2% with agriculture
growth at 3.4%, industry at 3.7%
and services at 5%.
Sectoral Growth:
Agriculture: is envisaged to grow
by 3.4% in 2011-12 against 1.2%
achieved last year (below par fue to floods). Major crops which
recorded negative growth of 4% last year is projected to grow at
3%; minor crops from 4.8% to 2%, livestock from 3.7% to 4% and
fisheries from 1.9% to 2%.
Industry: The manufacturing sector as a whole is expected to grow
by 3.7% against 3% recorded last year. Growth of large scale
manufacturing (LSM) at 2% largely depends on better supply of
electricity and gas. Construction


Growth by Main Industries:
Gross Domestic Product 2009-2012


Special Programs by Government (incl. Infrastructure):
Sectoral Growth Programs

Commodity Producing Sectors:
Agriculture: Ministries of Agriculture and Livestock have been devolved.
All future development programs will now rest with provinces. Federal
Government will focus mostly on devising national policies and promoting
research and development.
Manufacturing, Minerals and Commerce: Under draft industrial policy 2011,
manufacturing activities will be diversified, SMEs to be promoted, cost of
doing business and better regulations to be addressed. An allocation for Rs
2 billion has been earmarked for the Ministry of Industries and Production while
Rs 130 million has been earmarked for Textile and Rs 364 million has been set
aside for the Commerce Sector.
Physical Infrastructure:
Energy: Overcoming energy shortage is the highest priority. An amount of Rs
137 billion including Rs 19.4 billion in foreign aid has been reserved for
the power sector; whereas, Rs 0.9 billion is allocated for the fuel sector.
Major projects to be financed are Basha Diamer Dam, Chasma 2, 3 and 4,
Neelum Jehlum hydropower, Guddu Power Plant and combined cycle
power plant at Chicho Ki Malian. During 2011-12 the plans submitted by
GENCOs, PPIB and WAPDA will provide 2,110 MW.

Sectoral Growth Programs (cont’d)

Water Resource Development: The strategy is to focus on irrigation,
drainage, flood control /reconstruction and enhancing capacity of
storage. For 2011-12, Rs 34 billion has been allocated. Major projects of
this sector are: raising of Mangla Dam, Gomal and Satpara Dams,
Kachi, Rainee and Pat Feeder Canals, Right Bank Outfall Drain from
Sehwan to Sea (RBOD-II) and Balochistan Effluent Disposal into RBOD
(RBOD-III).

Urban Development: Major programs include economic development of cities
and Prime Minister’s One Million Housing Program for Low Income
Groups. Priority is accorded to the reconstruction and rehabilitation of
infrastructure damaged by the floods 2010.

Environment: Focus of the Environment Policy is on establishing an
environment friendly, just and sustainable economic system and
achievement of MDGs 2015.The subject is devolved to the provinces. Major
programs are executed by them


Special Programs by Government (incl. Infrastructure)
Public Sector Development Program (PSDP) 2011-12

For the year 2011-12 National Economic Council (NEC) has approved an
overall size of PSDP at Rs 730 billion showing an increase of 58% as against the
revised estimate at Rs. 462 billion, which is equal to 3.5% of the GDP, compared to
2.6% of GDP in the Revised Estimates 2010-11.
The Salient features of PSDP allocation for 2011-12:
Federal PSDP has been developed in line with the New Growth Strategy which
focuses on the “software (innovation, institutional reforms and entrepreneurship)
as opposed to the “hardware (physical infrastructure) of growth.

Federal PSDP for the year 2011-12 has been kept at Rs 300 billion which is higher by 61% than
revised estimates 2010-11– inclusive of ERRA Rs 10 billion (with foreign assistance component of
Rs 36.8 billion).
In Federal PSDP, highest allocation has been provided to infrastructure, which is 57% of the
total allocation, followed by 42% allocation to the social sectors.
The Corporations' PSDP 2011-12 has been placed at Rs 72 billion indicating an increase of 110%
over revised estimates 2010-11.
The share of Federal Ministries/Divisions in 2011-12 PSDP is Rs 157 billion indicating an increase of
101.3% over revised estimates 2010-11.
The provincial development programme for 2011-12 has been estimated at Rs 430 billion as
against Rs 266 billion in revised estimates 2010-11 showed an increase of 61.7%.
In view of resource crunch, priority has been accorded to projects near completion, protection
of contractual bindings with foreign funded projects and balanced development.


PSDP Growth 2010-11 to 2011-12


PSDP Growth 2010-11 to 2011-12 (cont’d.)

LD T
Traction


“ Perfection is achieved, not when
there is nothing more to add, but
when there is nothing left to take
away.”
Antoine de Saint-Exupery
French writer (1900 - 1944)


Thank you for your attention!

Mehdi Yasir
Dy. General Manager
Business Development
Industry Sector

Siemens (Pakistan) Engg. Co. Ltd.
B-72, Estate Avenue
S.I.T.E., Karachi
Pakistan

Phone: +92 21 3 259 2936
Mobile: +92 21 322 - 222 4030

E-mail: yasir.mehdi@siemens.com


Backups
Economy of the Pakistani Market


u p
Pakistan Economic Review ck
Ba

• Pakistan economic review projects that because of strong economic policies taken up
by Pakistan government manufacturing and financial services sectors have flourished
since fiscal 2008.
• Export of goods is a major concern for Pakistan economy. From 1999, exports of
Pakistan have increased from $7.5 billion to $18 billion in financial year 2007-2008.
•
• Major items for exports include cotton fiber, vegetables, rice, electrical appliances,
furniture, cement, tiles, marble, textiles, clothing, sports goods, powdered milk,
livestock meat, software, seafood, leather goods, surgical instruments, carpets, rugs,
ice cream, chicken, wheat, processed food items, Pakistani assembled Suzuki cars,
salt, defense equipment, onyx, marble and engineering goods to mention a few.
• Economic review of Pakistan has been focusing in recent times on how to deal with
economic recession.
• Economic indicators look positive in present situation.
• Discount rate of central bank has been improved to 1.5 percentage points.
• Pakistan economic review projects that government encourages foreign investments
in various fields of real estate, telecommunications, software, energy, fertilizer,
aerospace, textiles, steel, ship building, arms manufacturing, cement and automotives

u p
Key Economic Indicators (2008 to 2010) ck
Ba
Indicators 2007-08 2008-09 2009-10 2010-11
Exports 27.80
19.22 17.79 19.63 (May)
(Billion $)
Imports 38.91
39.96 34.82 31.05 (May)
(Billion $)
Trade Balance
-20.74 -17.03 -11.42 -11.11
(Billion $)
FDI
5.15 3.72 2.21 1.5736
(Billion $)
Foreign Investment
5.19 2.67 2.14 1.9181
(Billion $)
Worker Remittances
6.5 7.81 8.91 11.201
(Billion $)
Forex Reserves
10.83 12.23 16.07 18.25
(Billion $)
Exchange Rate
71.0 88.90 86.21 85.95
(Rs. / US$)
GDP Growth 5.80% 2.10% 4.10% 4.10%
Inflation 10.30% 13.10% 12.90% -
Source:
State Bank of Pakistan (SBP)
Federal Bureau of Statistics (FBS)
Federal Board of Revenue (FBR)
www.brecorder.com
www.kse.com.pk


u p
GDP 2009 to 2012 / Growth by Main Industry ck
Ba


u p
Pakistan Economic Structure ck
Ba

• Characterized as semi-industrialized, Pakistan’s economy has grown
tremendously since its independence in 1947.
• Punjab region and Karachi constitute the major share in the economic growth of
the country.
• The first decade of the 21st century has experienced wide-ranging economic
reforms particularly in manufacturing and financial services sector, leading to
improvement in the country’s economic outlook.

Pakistan Economic Structure: Primary Sector
• Pakistan’s primary sector plays a major role in the country’s economy.
• Primarily an agrarian economy, Pakistan produces a range of agricultural products.
• Around 43% of the country’s labor is engaged in the primary sector, which in turn contributes
20.8% to the country’s economy in 2009.
• Pakistan is the second largest producer of Chickpea and the third largest producer of mango
in the world according to the 2005 FAO of the UN.
• Some other major agricultural products of Pakistan include onion, cotton, rice, tangerines,
oranges, apricot, sugarcane, date palm, Clementine and wheat.
• Dairy farming is also a large industry in Pakistan. In fact, Pakistan is the fifth largest milk
producer in the world.


u p
Pakistan Economic Structure ck
Ba

Pakistan Economic Structure: Secondary Sector
• Pakistan’s manufacturing sector provides employment to 20.3% of the country’s labor force
(est. 2005).
• Some major manufacturing industries include cotton textile and apparel manufacturing,
carpets, rugs, rice, chemicals, sports goods and leather goods.
• Some other popular industries are construction materials, mineral, paper products, food
processing and beverages.
• Around 51.4% of country’s exports include textile and apparel.
• The secondary sector experienced a growth of 5.4% in 2007-08. However, electricity shortage
remains the biggest challenge in ensuring development of Pakistan’s secondary sector.

Pakistan Economic Structure: Tertiary Sector
• The services sector of Pakistan mainly includes industries such as finance, insurance,
transport, communications and storage that account for 24% of the country’s GDP.
• Wholesale and retail trade has 30% share in the GDP.
• With increase in the country’s software exports, the IT industry is emerging as a flourishing
service industry.
• Despite union unrest, the Pakistani government is actively engaged in privatization of banking,
telecommunications and utilities to produce more jobs in the country.


Growth by Main Industries- p
u
Real GDP (Commodity Producing Sectors) ck
Ba
Year 2008-09R 2009-10P
A) Commodity Producing Sector 2,555,948 2,646,845
I. Agriculture 1,195,031 1,218,873
Crops 537,087 534,737
- Major Crops 400,486 399,729

- Minor Crops 136,601 135,008

Livestock 622,531 648,106
Fishing 21,319 21,626
Forestry 14,094 14,404
II. Industry 1,360,917 1,427,972
Manufacturing 997,966 1,049,569
- Large-scale 664,405 693,355

- Small-scale* 333,561 356,214

Mining and Quarrying 137,707 135,411
Construction 112,884 130,203
Electricity & Gas Distribution 112,360 112,789

Growth by Main Industries (cont‘d) p
u
Real GDP (Services Sector) ck
Ba
Year 2008-09R 2009-10P
B) Services Sector 2,892,089 3,023,923

Wholesale & Retail Trade 921,015 968,150

Transport Storage & Communication 554,115 578,966

Finance and Insurance 314,813 303,521

Ownership of Dwellings 150,629 155,916

Public Administration & Defence 332,108 357,134

Community, Social & Personal Services 619,409 660,236

GDP at Factor Cost (A+B) 5,448,037 5,670,768


Pakistan\'s Economic Outlook

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