Pakistan's economic prospects looking up

LIKE other developing countries, Pakistan has been facing economic headwinds in recent years due to the many changes taking place in its domestic sectors as well as in the global economy. Fortunately, the worst seems to be over for the country as its economic growth outlook is improving.

"The Asian Development Bank in its Asian Development Outlook 2021 projected Pakistan's GDP growth to reach 4 per cent in the current fiscal year (2021-22) as business activity gradually resumes and growth picks up in agriculture and industry," says Pakistan's High Commissioner in Singapore, Rukhsana Afzaal, in an interview with The Business Times on the occasion of her country's national day on March 23.

The expected improvement in domestic demand is likely to raise growth in the services sector too. According to ADB, investment is expected to strengthen as the global sentiment improves and the IMF-supported stabilisation programme continues to progress, she adds. Inflationary pressures will likely come from ongoing economic recovery and rising global oil prices but should be tempered by expenditure reform and the government's commitment not to borrow from the central bank.

"Export growth is expected to accelerate due to upturn in economic activity in Pakistan's major trade partners, continued efforts to reduce the cost of doing business and the newly introduced export facilitation scheme, which allows duty and tax-free acquisition of inputs: intermediate goods, plant, and machinery," she says.

Imports are expected to rise due to domestic economic recovery, higher international oil prices, and rationalisation of customs and regulatory duties in the next budget (2022-23). Remittances are likely to remain high due to the Roshan Digital Account initiative and will help narrow the current account deficit, she adds.

Afzaal says Pakistan's current budget (FY21-22) is "growth oriented" with focus on sustained and inclusive growth, horizontal and vertical expansion of the social safety net called the Ehsaas programme, and successful continuation of the IMF programme.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

"It will boost economic activity through higher public development spending and consequently supporting job creation. Initiatives like Kamyab Jawan (Successful Youth), Sehat Sahulat Card (Health Facilitation Card) for 4 to 6 million families, Naya Pakistan Housing Scheme (low-cost housing), house financing mark-up, collateral free lending to SMEs, etc, are some of its highlights."

The government is focusing on comprehensive tax reforms to generate more revenue. A Uniform Export Facilitation Scheme is being devised in addition to an Agriculture Transformation Plan, with special focus on social spending, uplifting of small farmers and improving agriculture output through interest free loans, establishment of cold storage for better food security, commodity warehousing and food processing.

"The plan entails expansion in land under cultivation, revamping extension services, boosting water use efficiency, developing post-harvest storage and food processing plants, augmenting bank credit, and introducing the Kissan Card as digital wallet for direct and swift transfer of subsidies. These initiatives will put our economy on an upward trajectory," Afzaal tells BT.

Pakistan is committed to reforming, modernising, upgrading, and automating its system to match the ongoing investments in its infrastructure for greater cross-border trade and regional connectivity. It offers a liberal investment regime with all economic sectors open to foreign investment with just a few exceptions like arms and ammunition.

"Singaporean companies can benefit from our reduced cost of doing business, simplified procedures with one-window operation, industrial clusters, 22 notified SEZs, Special Technology Zones, and linkages of trade, industrial and monetary policies. They can even set up their own SEZs with full facilitation provided by Federal and Provincial Boards of Investment (BoI) and enjoy 100 per cent repatriation of remittances of capital, profits and dividends without any upper limit imposed," says Afzaal.

"They can capitalise on incentives such as minimal duty at 5 per cent on import of plant, machinery and equipment (PME) in manufacturing sector, infrastructure and social sector, 0 to 5 per cent on PME in IT & Telecom services and 0 per cent in agriculture. There is no restriction for payment of royalty and technical fee on investment in manufacturing sector.

"For Singapore, the priority sector for FDI could be food processing, IT, telecom, logistics, SMEs, fintechs and infrastructure development. We are offering huge incentives on investments in IT, import of modern technologies, import substitution industries and auto manufacturing."

Afzaal says that as Singapore is looking to beef up its food security, Pakistan offers opportunities as its agriculture output is the 10th largest in the world. It is the 4th largest producer of milk, 4th largest of rice and 11th largest of citrus fruits in the world. It produces 35 varieties of vegetables and more than 30 of fruits. It produces about 38 million tons of cereals (mainly wheat, rice and corn), 17 million tons of fruits and vegetables, 70 million tons of sugarcane and 60 million tons of milk. The total value of the country's agricultural output exceeds US$50 billion.

"Singapore can not only rely on Pakistan as a major source of food supplies but also explore investment in agriculture research, food-tech, food processing, preservation and storage facilities, where Pakistan is offering lucrative incentives on FDI.

"Similarly, Pakistan produces 4.5 million tons of meat and 600,000 tons of fish. It has the world's 5th largest population of chicken. Singapore Food Agency may consider allowing import of fresh and frozen/processed meat, poultry/eggs and their products from Pakistan. Some of our chicken brands have presence not only in the Middle East but also in the UK and US markets.

"The modern food retail industry in Pakistan hit the US$2.5 billion mark in 2021. European supermarkets, Metro, Carrefour, and Tesco have opened several self-service outlets in Karachi, Lahore, Faisalabad, and Islamabad, in collaboration with Pakistani groups. Last year, Pakistan was added to Amazon's approved seller's list enabling its exporters to sell their products online.

"Similarly, food service industry in Pakistan is capitalising on changing lifestyles, a growing, young population, expansion of urban malls, modern retailing, and an increase in the number of working women. Pakistan can also become a major source of export of services to Singapore including construction, banking, IT and telecom, legal services, etc.

"The Pakistan High Commission co-organised four webinars with the Institute of South Asian Studies at the National University of Singapore on the country's fresh and packaged food exports, digital transformations, regional connectivity, and capital market development last year. As a result of its efforts to boost Pakistan's food exports to Singapore, the country was identified as a major source of food supplies by Singapore.

"Singapore has been added to the list of 91 countries with e-visa facility and visas are issued within 24 hours. Singapore was the largest investor in Pakistan's tech sector last year," says Afzaal.

"We also appointed Abdul Lateef Siddiqui, chairman and CEO of Global Radiance Shipping Company as Pakistan's Honorary Investment Counsellor to Singapore, to facilitate the mission's efforts to attract Singapore FDI into Pakistan. The High Commission is also trying to re-establish direct air links between Pakistan and Singapore. So, the journey continues and skies are the limit."