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How Pakistan can achieve a $1 trillion economy

Simple rule, you need increase of 20 B $ in exports per year, you need an investment of 10 B $ to do that ( using a conservative estimate of sales to total asset turnover of 2:1).

Now do you park that money in real estate or in industries is up to you but down the line you will have to face consequences of your actions.
The Chinese are busy in doing infra projects funded by their state banks using their own companies with their own Chinese labor. They are selling huge by setting up subsidiaries and already dominate your telecom sector. They are really not interested in setting up or upgrading your manufacturing capacity. You guys need to reshape your economic relationship to milk the Chinese a bit and not just get exploited. Its a difficult prospect to strengthen your industrial sector when under the umbrella of the country with the most powerful industrial base.
 
The Chinese are busy in doing infra projects funded by their state banks using their own companies with their own Chinese labor. They are selling huge by setting up subsidiaries and already dominate your telecom sector. They are really not interested in setting up or upgrading your manufacturing capacity. You guys need to reshape your economic relationship to milk the Chinese a bit and not just get exploited. Its a difficult prospect to strengthen your industrial sector when under the umbrella of the country with the most powerful industrial base.




The Chinese are setting up industrial and manufacturing plants all over Pakistan but yes, they are firmly in control of that.
 
The Chinese are setting up industrial and manufacturing plants all over Pakistan but yes, they are firmly in control of that.
You should be curious about the cash flows from those industries. How much of the profit stays and gets spent in Pakistan and how much of debt you guys incur. You guys have a great military relationship. But their biggest asset is their economy. Put some tough clauses about local sourcing and offsets.
 
You should be curious about the cash flows from those industries. How much of the profit stays and gets spent in Pakistan and how much of debt you guys incur. You guys have a great military relationship. But their biggest asset is their economy. Put some tough clauses about local sourcing and offsets.




Truth is, nobody in Pakistan knows. The Chinese build really good complexes and other infrastructures all over Pakistan. They build good hospitals and other institutions. They run them really well too as most employ mainly Chinese staff. As a result no one says anything to them and they do as they please. Even the religious fundamentalists and terrorists don't bother the Chinese in Pakistan. It is rumoured that they have been paid off by the Chinese.
 
The Chinese are busy in doing infra projects funded by their state banks using their own companies with their own Chinese labor. They are selling huge by setting up subsidiaries and already dominate your telecom sector. They are really not interested in setting up or upgrading your manufacturing capacity. You guys need to reshape your economic relationship to milk the Chinese a bit and not just get exploited. Its a difficult prospect to strengthen your industrial sector when under the umbrella of the country with the most powerful industrial base.


Trust me, we in banking industry do know that not every FDI is beneficial for us.

I was referring to investment by local players in the post you quoted.

The businesses here have plenty of money especially the upper middle class. It is just that they take the easy way out and invest in typical rent seeking sectors and then cry when the chinese or someone else comes and dominates our local industry players in ventures where we actually need capital.

However, not everything is as bad as you portray. Our establishment isn't that blind that we will let the chinese take over everything.

Slowly but surely the private sector is being given tough love to get its act together. Long term goal is import substitution and to create synergy between pakistani and the chinese industries. Several industries in china will not remain competitive as china moves upwards GDP wise. Second stage of CPEC (currently happening) also targets such sectors as well.
 
In the short term, SBP needs to start cutting interest rates.

I agree with you but remember the interest rates, themselves a sin, are high to control inflation.

You aren't going to control inflation without drastically reducing imports which you aren't going to be able to accomplish without killing the FTA with China, frankly all FTA's past governments have signed need to go, and raising import tariffs while simultaneously raising other sources of tax revenues (ex. income, property, etc...) to invest in domestic industry initially to substitute imports for domestically manufactured products along with an initial focus on our primary sector industries (i.e. agriculture and mining). Only once your own domestic industries have total control of your domestic market and are able to compete on a global scale do you open up your economy to FTA's.

Just to give you an idea of how STUPID our FTA to China is back in 2006 when it was signed 50% of Pakistan's total exports in dollar value were textiles yet China had a textile industry larger than the entire GDP of Pakistan even now its textile industry is almost the size of our entire economy.

Why did Musharraf sign this and why didn't Zardari and the PPP or Nawaz Sharif of the PML-N or even Imran Khan and the PTI scrap it?

Even the Pakistani Business Council confirmed in 2013 what I've been saying for years that Pakistan can't utilize those FTA's:

FTA China Results.png


They confirmed that:

Many believe that the product coverage of the FTA should be increased i.e. increasing the number of products part of the current FTA. Given the low utilization (5%), this would be an exercise in futility. A more appropriate measure would be to renegotiate the FTA in such a way that products that have high potential of exports as well as enjoy a comparative advantage against the rest of the world are given higher concessions”
Yet what does Khan and the PTI do? They sign FTA 2.0

Pakistan's economic complexity over the years, particularly since signing the FTA with China, has dropped:

ECI Index Pakistan.png


These deals are brought to you by people like Musharraf and kept in place by the same people and political parties that were just a while ago calling for nationwide lock downs which I put up a post about citing that they made absolutely no sense in light of clinical data and were dangerous for the country.

Now everyone is going on about how great CPEC will be for the country just like they were going on about the FTA with China years earlier in 2005-2006.

stop over regulating the economy

reduce corporate taxes

end transaction taxes nonsense

make a free zone like dubai ( gwadar)

invest in renewable and give cheap elec to textile

get back control of state bank from Rotschild BIS

We can look over what laws and regulations are hampering economic success but I doubt there are more than a handful. Regulations are important for example they tell companies they can't dump toxic waste into our rivers or garbage on the side of roads to save money, need to abide by standard manufacturing practices so as not to make Pakistani industries look like trash, etc...

Transaction taxes (i.e. VAT) are exactly what Pakistan needs particularly in light of our massive import bill. Short of raising tariffs and cancelling our insane FTA's with China you need the taxes collected from VAT's to invest in local industries. The same way companies need to be paying taxes in order to collect revenue for directed investments into key industries.

Dubai's economy is unsustainable. Something like 70-80% of the countries population are expats who don't have citizenship in that despotic Arab sh*thole. What happens when people no longer need to go to the UAE for work? What happens when people stop traveling there on vacation?

upgrade agriculture technology increase yields and produce better quality export surplus second step setting up processing industry and market Pakistani products ij international market agriculture alone can earn Pakistan 5-6 billion a year but for that govt needs to implement good policies!

I agree, initial focus should be on the development of our primary sectors industries (i.e. agriculture and mining) and low income housing which itself will spur growth in our steel and cement manufacturing industries allowing them to produce on competitive market of scales for global export.

This is particularly important because Pakistan has the worst housing shortage in the region just shy of Afghanistan which also represents an immense opportunity for growth:

IMG_E1290.JPG


However, there are a host of investments we can make into existing industries to substitute imports of products we order large enough quantities of to produce on a very competitive market of scale (ex. chemicals like Diammonium Phosphate, P-Xylene, ethylene glycol, various medicines, etc...).

We had an industrial base. It has suffered due to high cost of manufacturing. You can not compete in international market with high cost of manufacturing.

I agree but costs go down as you scale up your production hence you're buying larger quantities of raw materials, including electricity, reducing cost of acquisition.

Simply put Pakistani industries get little to no subsidies, have been neglected for years since you never had government lead investments into our manufacturing and they're being made to compete against much larger industries from around the world like China in light of our FTA with them.

Spend on infrastructure, boost literacy rate, democratise and form a workable and trustworthy republic for investors and citizens, etc.

I personally wouldn't spend a penny on education or healthcare I'd direct all money into industry. You don't need to be literate to work in an assembly line while the country already has more than enough degree holders to take on the jobs that require them.

As for FDI it should be conditional with a host of rules attached.

Trust me, we in banking industry do know that not every FDI is beneficial for us.

Couldn't agree with you more.
 
Karachi needs to developed, otherwise Pakistan will stay in debt trap for eternity
 
Forget about 1 trillion $..I will be surprised if your Govt will be able to keep your Nominal GDP above 220 Billion $ in Post Covid 19 world...
Don't go too harsh on them.
I'm guessing one day, perhaps 2 years from now; they will realise China has done more harm to them than India ever could in the last 74 years.
 
Don't go too harsh on them.
I'm guessing one day, perhaps 2 years from now when they will realise China has done more harm to them than India ever could in the last 74 years.

China has done no harm to Pakistan this isn't their fault just like Turkey shares no blame for what occured with Karkey.

I am all for the utilization of CPEC as a transit and energy corridor to and from China in fact it would be very successful as such I just don't believe the ridiculous claims put forth by the PML-N.

My only objection is that the money would have been better utilized if directed into particular key areas and industries for example Thar lignite rather than power plants that relied on imported coal and gas or solar power which back in 2014 cost something like RS 16/KWh and that was before the 50% depreciation that followed.

Furthermore, a primary focus for Pakistan should have been on the FBR and reforming it along with properly funding it (my estimates are it has been underfunded anywhere from 500-1400% year on year maybe for decades) so we could generate the revenue needed to invest in ourselves.

Though I'm not involved in the backroom dealings from what I can see the Chinese have proven themselves to be invaluable and trustworthy allies.

The fault squarely lies with Pakistan's leadership of the past who made very poor choices.

India is a horrible hub of Hindu terror that never should have existed but came into being by lying to virtually every inhabitant within its borders and continues to occupy both Chinese and Pakistani territory.

We will continue to work with China in pursuit of regional peace and prosperity for all in the face of state sponsors of terrorism like the US and India and their threats of violence.
 
Simple
1. First it need to get to 90% primary education
To Spur services growth, invest in health sector
2. Deregulate different issues(ease of business)
3. Provide reliable utilities

Little progress is made on these


The Chinese are busy in doing infra projects funded by their state banks using their own companies with their own Chinese labor. They are selling huge by setting up subsidiaries and already dominate your telecom sector. They are really not interested in setting up or upgrading your manufacturing capacity. You guys need to reshape your economic relationship to milk the Chinese a bit and not just get exploited. Its a difficult prospect to strengthen your industrial sector when under the umbrella of the country with the most powerful industrial base.
Exports has nothing to do with size of economy but with balance of payment

You can become a trillion dollar economy with just 50b$ exports as long as you dont have imbalance in exports & import

Problem with pakistan is we import simple stuff like unrefined oil, edible oil, diapers and food
 
Industrialisation and import substitution along with exports.
 
Simple
1. First it need to get to 90% primary education
To Spur services growth, invest in health sector
2. Deregulate different issues(ease of business)
3. Provide reliable utilities

Little progress is made on these



Exports has nothing to do with size of economy but with balance of payment

You can become a trillion dollar economy with just 50b$ exports as long as you dont have imbalance in exports & import

Problem with pakistan is we import simple stuff like unrefined oil, edible oil, diapers and food

Balance of payment solution is exports. Look at Bangladesh, their GDP per capita is now higher then India and they are not going to IMF and neither their currency is artificially overvalued.
 
In the last 15 years pak lost its export base (textiles) ruppee depreciation also didnt helped but reduced real economic size and with double digit inflation have now even reduced nominal GDP. If you take out cpec $ the economy is in downward spiral.
 
1 easy way is to document undocumented economy...

60 % of Indonesia GDP comes from small and medium size companies where majority of the business are informal, alias dont pay tax and undocumented. Despite so, Indonesian GDP calculation is some how able to see their contribution to our GDP and of course included into GDP calculation.
 

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