Pakistan Year 2015 in Review

[RiazHaq]

A Happy, Peaceful and Prosperous New Year to all my readers.

The year 2015 turned out to be a good year for Pakistan with the return of general optimism among businessmen, investors and consumers. Economic recovery continued as Pakistan Army's efforts, including its Operation Zarb e Arb and Karachi Operation by Rangers, started to bear fruit with significant decline in terrorism. There were new signs of a thaw in India-Pakistan ties with Indian Prime Minister Modi'

s surprise year-end visit to Lahore. Efforts to bring peace in Afghanistan took a new positive turn with the hopeful entry of the Taliban into a quadrilateral process involving Afghanistan, Pakistan, China and the United States. Threat of ISIS (Daish) presence rose in South Asia with reports of stepped up ISIS recruitment in Afghanistan and Pakistan.

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Highlights:

1. Pakistan economy neared the historic one trillion dollar mark in PPP terms in 2015. The nation's PPP GDP increased from $884 billion to $930 billion, an increase of $46 billion. Pakistan per capita PPP GDP is $4,902 for 2015, up from $4,749 in 2014, according to the IMF. Nominal GDP based on current exchange rates is reported at $270 billion in 2015, up from $246 billion in 2014, an increase of $24 Billion. Pakistan's per capita nominal GDP for 2015 is $1,427.085, up from $1,325.790 in 2014.

2. Pakistan's actual GDP is higher than what the official figures show, according to the State Bank of Pakistan. The SBP annual report for 2014 released in 2015 said: "In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM."

3. Terrorism declined to the lowest level since 2006 as civilian deaths in terrorist incident nearly halved from 1781 in 2014 to 911 in 2015, according to South Asia Terrorism Portal.

Source: South Asia Terrorism Portal

4. China announced plans of massive $46 billion investment in the country as part of the China-Pakistan Economic Corridor (CPEC). Once completed, the this corridor with a sound industrial base and competitive infrastructure combined with low labor costs is expected to draw growing FDI from manufacturers in many other countries looking for a low-cost location to build products for exports to rich OECD nations.

CPEC Projects Map

5. Hopes for resolving Pakistan's energy crisis rose as liquified natural gas (LNG) priceshit historic new lows and hydrocarbon prices continued to plummet. An LNG terminalstarted operations at Port Qasim in Karachi and started receiving LNG cargoes.

6. Over 20 million users signed up for 3G and 4G mobile broadband services after initial rollout in late 2014. Double digit growth was recorded in cement consumption and automobile sales, all pointing to accelerating economic growth.

7. Enrollment in grades 13 through 16 exceeded 3 million mark in Pakistan's 1,086 degree colleges and 161 universities. The 3 million enrollment is 15% of the 20 million Pakistanis in the eligible age group of 18-24 years. In addition, there are over 255,000 Pakistanis enrolled in vocational training schools, according to Technical Education and Vocational Training Authority (TEVTA).

8. Prime Minister Nawaz Sharif launched a national health insurance plan in the closing days of 2015, further expanding a basic social safety net that started with Benazir Income Support program for the poor during the PPP years in power.

Lowlights:

1. Out-of-school children declined by just 1% as Pakistan continued to lag behind neighbors, particularly Bangladesh, India and Sri Lanka, on human development indices.

2. The latest human development report for 2015 from UNDP shows human development progress over several decades and confirms it's been the slowest in this decade. Pakistan's HDI grew 13% in 1980s, 11.2% in 1990s, 17.6% in 2000s, and just 3% since 2010. It grew the fastest when President Musharraf was in office from 2000 to 2008.

3. Several reports and arrests of ISIS sympathizes and fundraisers indicated rising threat in South Asia from the Iraq-Syria based terror group.

4. Many politicians, particularly in Sindh province, continued to hinder the Pakistan Army Rangers' efforts to bring peace to Karachi.

5. The implementation of National Action Plan to fight terror has received little more than lip service from the civilian leadership in the country, raising fears of the return of terrorism in the future.

Summary:

Decline of terrorism has enabled Pakistan's economy to begin to recover in 2015. It needs to be sustained for the long term. A basic requirement for sustainable development is investment in and focus on human resources of the country. Education and health care must receive top priority to build a peaceful and prosperous Pakistan.

Source

 

[RiazHaq]

#Pakistan economy looking good. Its shares market deserves an upgrade from frontier to emerging market status. #MSCI http://www.nasdaq.com/article/frontier-markets-does-pakistan-deserve-an-upgrade-cm561804 …


The country (Pakistan) is brimming with untapped potential and a population filled with unfilled dreams. The people are very similar to Indians, and I can say with some certainty that they wish to be an integral part of the capitalist system. They should be given that opportunity, and under the premiership of Nawaz Sharif, I believe they will.


The Pakistan capital markets, and in particular the Karachi Stock Market and its benchmark index KSE100, have over the past few years performed well, returning over 150% cumulatively in local currency since January 7, 2012. China has recently shown great interest in Pakistan and has pledged to assist them in building an economic corridor with a $46 billion network of transportation links as part of China’s “one belt, one road” initiative.


When completed, no doubt, this will add substantially to Pakistan’s GDP growth of 4.2%. Recently, Mr. Sharif spoke at a forum in Sri Lanka where he said, “Democracy creates far better opportunities for both economic growth and cultural progress than the authoritarian regimes. My government has placed strong emphasis on bold economic reforms to achieve significant improvement in all sectors of the economy." But he did not elaborate on what the reforms would be.


As far as investment opportunities, it is of interest to me that Global X recently launched a Pakistan focused ETF (
PAK
), which since its launch in May 2015 has a return of negative 15%. I expected that, in the light of what most Asian stocks have returned in 2015. However again, I am not going to invest in the ETF, but would rather gain exposure by investing in some GDRs being traded on the London Stock Exchange. With all the infrastructure projects being talked about and the tangential business derived from that, for a retail investor, I believe the financial sector would be a great entry point, and in particular banks.


The largest Pakistani bank, Habib Bank Ltd. (HBL), is only traded on the Karachi Stock Exchange, but retail investors can purchase shares online. However, the banks I would like to target are Pakistan’s fourth largest bank, MCB Bank (MCBS) which is trading at $3.50 a share, and is at a 52-week low but has tremendous upside; and United Bank (UBLS) which is trading around $6.70 a share, close to its 52-week high. In the coming years, these two banks should outperform. Both banks are part of the PAK ETF which also includes some sectors that I do not think will perform well in the near term. They are of course, oil and gas.


So, in my opinion, Pakistan should be characterized in the near future to emerging market status from frontier market. They deserve it. But more importantly, Pakistan’s youth deserve a bright and rewarding future. Oh, and one last item. Have you ever watched the Coca-Cola Ramzan commercial? You should. You knew I had to bring Coke into this article!