Investing in Pakistan?

This week the Chinese Premier Li Kequiang met with the  President Asif Ali Zardari and the Prime Minister elect Nawaz Sharif, the leader of the Pakistan Muslim League (PML). The purpose of the meeting was to promote and revitalise the economies of both Western China and Pakistan. Their intention is to try to create an economic corridor between the two countries.

It appears as if the Chinese Premier is totally intent on spreading China`s markets away from their dependence on the old unreliable developed world markets. Since becoming Premier he has made visits to most of the Asean countries, and also to Japan and to Indonesia. China has also increased its investments into Africa and into South America. Put all of this together with their drive to increase internal consumption at home and you can see that in not too many years time China will have stabilised its manufacturing to meet demand. China will yet again be a great place to invest.

Pakistan is a nuclear armed country with a population of over 150 million people living in what many people in the world regard as a failing State. Pakistan is ranked 146th out of 186 countries in the United Nations human development index. This country faces a daunting array of problems which include Islamic unrest, a failing currency, a static economy and failing power supplies to name but a few.

At the recent elections Nawaz Sharif was given a sizeable mandate to try to rectify the country`s situation. Sharif is the co-owner of the massive two billion dollar conglomerate the Ittefaq group which is involved in steel, paper, sugar, textiles and engineering. He is a conservative, pro-business devout Muslim and this will be his third time in office. His first problem will be to persuade the World Bank and the IMF to make future loans to Pakistan in order that it might meet its existing foreign debt obligations. Sharif`s slogan is a “Strong economy will make a Strong Pakistan”. He is seen as a flag bearer for private industry and entrepreneurship.

Trade between China and Pakistan is already on the rise and at last week`s meeting a two year target was set to achieve a trade turnover between the two countries of 14 billion dollars. The Chinese are already involved in the building of new power stations and road and rail projects. These are all designed to increase the ability of the young low wage earning population to become gainfully employed and improve the GDP of Pakistan as they become meaningful producers and consumers.

The Karachi stock exchange has around 500 registered companies on its books. That is tiny in comparison with its neighbour India`s stock market which has ten times this amount. However it is worth noting that on the announcement of Naway Sharif`s election the Karachi stock exchange rose to its all time high of 20,300. This man would appear to have the knowledge and intention to drag Pakistan into the 21st century. Provided he can avoid execution by terrorists and he continues to be assisted by his Chinese friends then perhaps he just might manage this task. So perhaps we should put Pakistan on the watch list for investment alongside the Asean economies and Indonesia.