ASSIGNMENT

International business
Analysis
Economy of Pakistan
Submitted by: Muhammad Arslan(01-120091-041)
Javaid Rajput

Bahria university Islamabad

Pakistan’s economic condition is in crisis in these years. Pakistan has a semi-industrialized
economy, which mainly encompasses textiles, chemicals, food processing, agriculture and other
industries Gdp of Pakistan is decreasing and attaining the set limits. Government doesn’t have
the investments and resources to run the country so that loan is taken and burden of loans are
increasing. Government is fail generate the income so that these loan can be refunded on the
other hand government is not cutting its expenses. Millions of expenditure are made which are
unproductive. Recent governments have not taken any step which can benefit the economy
condition of Pakistan. There is lack of resources in Pakistan. Energy crisis play a very important
role to destroy the business in Pakistan. Foreign investment is not coming in Pakistan. Pakistan
has achieved FDI of almost $8.4 billion in the financial year 06/07, surpassing the government
target of $4 billion. Foreign investment had significantly declined by 2010, dropping by 54.6%
due to Pakistan's political instability and weak law and order, according to the Bank of Pakistan.
Terrorist impact on Pakistan’s economy is very negative. Inflation is tremendously increasing.
Buying power of people is becoming less. Corruption rate is very high which doesn’t allow
investors to come in and do business in Pakistan. Trade condition of Pakistan is also not going
well. Trade is increase in term of worth but not in term of quantity. It should be increase in
term of quantity.

Pakistan’s trade deficit is now between $12 - $13 billion. In addition, the Pakistani government
had not managed the country’s agricultural sector properly and has failed to invest in the
power sector. For instance, the government maintains insufficient buffer stock and it has no
fund to manage the import and export of agricultural commodities. The poor management of
the agricultural sector is further compounded by the smuggling of wheat into Afghanistan.
Additionally, the Pakistani government has not carried out a serious analysis of the impact of
the country’s economic growth on the increased demand for energy. Demand elasticity for
power tends to be in the range 1.4 to 1.5. This means that there is a 1.4% increase in demand
for electricity for every 1% increase in GDP growth.

There is chance in private business. Government can make economic condition better by
providing facilities to the private business. If private business in Pakistan flourish then there is a
chance to foreign investment comes in. foreign investment is very imp for the any economy of
the country. But this can be only possible if government decrease the corruption rate and
provide facilities to the businesses. Government have to pay attention of the energy crises
because without this private business cannot work out.

Increase Pakistan’s Domestic Savings Rate: Pakistan cannot maintain a strong economic
growth rate without considerable improvement in domestic savings since these savings will
lead to increased investments in the economy. Savings can be encouraged by implementing
program loans and by adopting institutional reforms.
 Invest in Human Resource Capital: Pakistan has one of the youngest populations in the world.
There needs to be focused investment in education, particularly at the primary and secondary
school level and in technical schools.

Decentralize Economic Decision-making in Pakistan: For instance, Punjab is a well-managed

province and could easily achieve an economic growth rate of 10% if it is allowed to manage its
own resources. Given that Punjab accounts for 60% of Pakistan’s economy, high growth rates in
Punjab would have a positive impact on the entire economy.

Serve As a Regional Transit Route: Pakistan should be opened up as a transit route for the
region, thereby creating tremendous opportunity for FDI.