COMSATS UNIVERSITY OF INFORMATION TECHNOLOGY

Global Business Management

Potential of Global Business In Pakistan
Submitted to: Sir Imran Ali

Submitted By
Hamza Saleem- BBA-Sp09-049 12/14/2011

This assignment provides a detailed discussion on the potential of global business in Pakistan, tells about the imports and exports and tells that why Pakistan is an ideal place for global investors and global business

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Table of Contents Topic

What is Global Business Global Enterprises Global Markets Merchandise Trade Economy Size Exports and Imports of Pakistan Exports Foreign Acquisitions and Mergers Imports Multinationals working In Pakistan Pakistan- Business potential and Opportunities Banking Sector Support Current Performance and Support to Multinationals in Pakistan Best option for Global Business in Pakistan Pakistan`s Comparative Advantage Investment Opportunities in Telecom Investment Opportunities in IT IT and Telecom Incentives Conclusion References

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What Is Global Business?

Global business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations. These transactions take on various forms, which are often interrelated. Primary types of international business are import, export trade and foreign direct investment (FDI). The latter is carried out in varied forms, including wholly owned subsidiaries and joint ventures. Additional types of international business are licensing, franchising, and management contracts. As the definition indicates, and as for any kind of domestic business, satisfaction remains a key tenet of global business. Beyond this, because transaction environmental factors, to different constraints, and to quite frequent conflicts resulting from different laws, cultures, and societies. The basic principles of business still apply, but their application, complexity, and intensity vary substantially. To operate outside national borders, firms must be ready to incorporate international considerations into their thinking and planning, making decisions related to questions such as these: How will our idea, good, or service fit into the international market? Should we enter the market through trade or through investment? Should I obtain my supplies domestically or from abroad? What product adjustments are necessary to be responsive to local conditions? What threats from global competition should be expected and how can these threats be counteracted?

When management integrates these issues into each decision, international markets can provide growth, profit, and needs satisfaction not available to those that limit their activities to the domestic marketplace.

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Global business refers to international trade whereas a global business is a company doing business across the world. The exchange of goods over great distances goes back a very long time. Anthropologists have already established long-distance trading in Europe in the Stone Age. Sea-borne trading was commonplace in many regions of the world in times predating Greek civilization. Such trade, of course, was not by definition "global" but had the same characteristics. In the 16th century all of the continents came to be routinely linked by oceanbased communications. Trading activity in the modern sense rapidly followed at the beginning of the 17th century; it might be more accurate to say that it "returned" again because trading of such character had taken place in Roman times as well.

Global Enterprises
Fernand Braudel, a prominent historian of commerce, describes early trading with distant points around the globefrom Europe to the Americas and from Europe to India and Asia. The two earliest global companies, both government chartered, were the British East India Company begun in 1600 and the Dutch East India Company, established in 1602. Both have now passed into history. The British company dissolved in 1874, but in its nearly 300-year history it had launched and for a long period had practically run the British Empire. The Dutch company was dissolved in 1798 after nearly 200 years of operations in Asia, India, Sri Lanka, and Africa.

Global Markets
From the point of view of a seller, a global market is an export market; from the buyer's vantage point, the global market represents imports from abroad. World statistics on international trade are collected by the World Trade Organization (WTO) located in Geneva. In 2004, the global market for exports was $11.28 trillion, with merchandise exports representing 81.2 and commercial services 18.8 percent of that total. Merchandise exports, using WTO's definition, include commodities as well as manufactured and semi-manufactured goods. Services are divided into transportation, travel, and the "other services" categories

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Merchandise Trade
The largest category of foreign trade is in machinery and transportation equipment, representing 16.8 percent of the totalbut the category pointedly excludes automobiles and related equipment as well as office and telecommunications equipment. Fuels and Mining Products is second with 14.4 percent of share. The other major categories are Office and Telecom Equipment (12.7 percent), Chemicals (11.0), Automobiles and Related (9.5), Agricultural Products (8.8), Other Manufactured Products not already mentioned (8.6), Semi-Manufactures (like parts and components, 7.1 percent), Iron and Steel (3.0), Clothing (2.9), and Textiles other than clothing (2.2 percent). Just ten countries around the world represent 54.8 percent of all merchandise exports. Germany led the world in 2004 with a 10 percent share of all exports, followed by the U.S. with an 8.9 percent share. Other leading exporters in order of share were China (6.5), Japan (6.2), France (4.9), the Netherlands (3.9), Italy (3.8), United Kingdom (3.8), Canada (3.5), and Belgium (10 percent of total). Pakistan has a minute share in the exports.

Economy Size
The economy of Pakistan is the 47th largest in the world in nominal terms and 27th largest in the world in terms of purchasing power parity (PPP). Pakistan has a semi-industrialized economy, which mainly encompasses textiles, chemicals, food processing, agriculture and other industries. Growth poles of Pakistan's economy are situated along the Indus River; diversified economies of Karachi and Punjab's urban centers coexist with lesser developed areas in other parts of the country. The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by foreign investment and renewed access to global markets, have generated solid macroeconomic recovery the last decade. Substantial macroeconomic reforms since 2000, most notably at privatizing the banking sector have helped the economy.

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Exports and Imports of Pakistan Exports

Exports are the products or services that a country sells across its borders. Major exports of Pakistan are as follows: Rice Kinnows Mangoes Furniture Cotton fiber Cement Tiles Marbles Textiles Clothing Leather goods Sports goods Surgical instruments Cutlery Electrical appliances Software Carpets and rugs Livestock meat, milk

Pakistan's exports increased more than 100% from $7.5 billion in 1999 to stand at $18 billion in the financial year 2007-2008.

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Foreign acquisitions and mergers

With the rapid growth in Pakistan's economy, foreign investors are taking a keen interest in the corporate sector of Pakistan. In recent years, majority stakes in many corporations have been acquired by multinational groups.

PICIC by Singapore based Temasek Holdings for $339 million Union Bank by Standard Chartered Bank for $487 million Prime Commercial Bank by ABN Amro for $228 million PakTel by China Mobile for $460 million PTCL by Etisalat for $1.8 billion Additional 57.6% shares of Lakson Tobacco Company acquired by Philip Morris International for $382 million

The foreign exchange receipts from these sales are also helping cover the current account deficit

Imports
This entry provides the total US dollar amount of merchandise imports on a c.i.f. (cost, insurance, and freight) or f.o.b. (free on board) basis. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms. Imports: $32.21 billion (2010 est.) $28.62 billion (2009 est.) Following are the major imports if Pakistan: Petroleum Petroleum products Machinery Plastics Transportation equipment

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Edible oils Paper paperboard Iron and steel Tea Technology

Multinational Working in Pakistan Multinationals

The term "multinationals" came into use during the same time to designate corporations that operated in at least two different countriesbut the actual use of the label applies to corporations that have a global presence. The term is used in a neutral sense simply to indicate very large size and participation in global markets. A more negative connotation of the term is that such corporations are effectively beyond the full reach of national laws because they have a presence in many locations, can move money and resources around at will, can sometimes escape taxation, and thus represent a power beyond public control. Some of the multinational working in Pakistan are: ABN-Amro Accenture American Express Apple Inc. Asian Paints BASF Bayer Black & Decker BMW Bridgestone

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Canon Inc Caterpillar Inc. Cisco Systems Citigroup Coca-Cola Costco Dell Dunkin Donuts Electrolux Faber-Castell FedEx Express Ford Motor Company Goodyear Tire and Rubber Company Google Honda HSBC IBM LG L'Oral McDonalds Maggi Michelin Microsoft Mobil Motorola Nestl Nintendo Nissan Novartis Panadol

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PepsiCo Philips Procter & Gamble Red Bull Reebok Samsung Sony Sony Computer Entertainment Sony Music Entertainment Sony Pictures Entertainment TCS Toyota Unilever Telenor Coca cola

PAKISTAN - Business Potential and Opportunities

The main economic driver in this emerging part of the world is the rise of growing middle class which is demanding better life style, social status, education, health-care and future for itself and its children. These phenomena shall continue for many decades to come till it levels out with the advanced nations. Pakistan is also an important part of this happening.

Pakistan has the distinction of possessing:

A population of 180 million people, with one of worlds largest growing middle class demanding better social and economic life for them and their children. There are 80 million mobile phone users and 20 million Internet users, where-by, Pakistan is positioned with people to people connectivity as one the best in the world. Per capita income of around 1000 USD being the highest in SARC countries. Pakistan Possesses: Second largest Salt Reserves

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Fifth largest Gold Reserves Fifth largest Coal Reserves Seventh largest Copper Reserves Seventh largest Rice Producer Eight largest Wheat Producer Fifth largest Milk Producer One of worlds largest Irrigation canal system fed from five large rivers One of worlds largest Gems reserves Have year round sunshine with four crops per year.

Pakistan has-- One of worlds largest skilled manpower in field of Technology, Medicine, Economy, Banking, Agriculture with global presence and recognition.-- World class road network connecting Peshawar-Islamabad-Lahore-Faisalabad, whereas, link to Karachi is under construction. The great blend of material resources, manpower and infra-structure possession and potential of Pakistan duly merits global and local investments in Pakistan, specially in niche areas such as: Diary Farming, Fisheries and Agriculture. Mines, Minerals and Metals Gems and Precious stones Renewable Energy Engineering and Services

Today, world is undergoing phenomenal shift of economic growth and talent availability from the west to the east.

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Banking Sector Support

Pakistan's FDI laws and conditions, taxation procedures, foreign exchange liberalisation, dividend repatriation, banking procedures are easy, transparent, friendly and non-cumbersome.

A strategic investor invariably considers Return on Investment Security of Investment Consistency in Rules and Regulation Security of its Personals

Current Performance and support to multinationals in Pakistan:

There are over 200 large multinationals operative in Pakistan.

Their balance sheet of the last six decades truly demonstrate that invariably all of them have done exceptionally well, benched marked to global performance indicators such as profit margins, return on investment and business growth rate.

Even today many multinationals operative in Pakistan have outperformed the operations in their home markets in Europe and America. There has been no dent related to Security of Investment. No foreign investment has ever been nationalized in Pakistan. The business and investment rules have been consistent with all successive governments in power. In fact each successive government improved the same to invoke fresh FDI.

Security of personals is indeed an area of concern in these difficult times. This is primarily the fall out on account of conflicts on our northern borders. Many countries have encountered similar issues and we are all aware that sustainable solutions in these countries also took lot of time. Same is the case for Pakistan but far more complex due to global and local political and

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social dynamics. We believe that we are more or less at the peak of the issues.Sooner and gradually it has to mellow down till normalcy in security is restored.

Best Option for Global Business for Pakistan

Pakistan's best option is to encourage growth in Small and Medium size industry.SME guarantees grass root economic growth which is sustainable and where larger numbers of entrepreneurs are the beneficiaries. India's and China's economic miracle happened due to mushroom growth of SME supported by the governments but, more by their overseas citizens who opted to return back to their countries with their knowledge, ideas and money and participated in the SME growth of their country. Today many of them are large global business leaders and players in the world economies. Pakistan is also now ready for this phenomenon to happen in this land of opportunities. We only need to put our act together. The influx of FDI compounded with technology transfer shall accelerate the process. This great Multilateral conference being held in Karachi aims to motivate foreign and local investors and entrepreneurs to look at Pakistan with fairness based on ground realities and not merely on the basis of global and local media projections. Very often ground realities are far different from the perception.

This

holds

true

for

Pakistan.

To come up with fair assessments and answers the visiting delegates may also share their concerns and issues with their fraternity of the existing foreign investors operative in Pakistan. Pakistan's best option is to encourage growth in Small and Medium size industry.SME guarantees grass root economic growth which is sustainable and where larger numbers of entrepreneurs are the beneficiaries. India and China's economic miracle happened due to mushroom growth of SME. Their overseas citizens opted to return back to their countries with their knowledge, ideas and money.

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Pakistans Comparative advantage

Low wages do not necessarily give a competitive advantage when labor productivity is also low. It is the unit labor cost which is critical to competitive advantage. Pakistans low unit labor costs in textiles are the main source of its static competitive advantage at present. But static advantage is of little consequence in a rapidly changing global economic environment and it is dynamic comparative advantage which should be taken into account. This leads us to the question: what are the fastest growing products in the global market?

Pakistan can today and in near term safely compete for products which have low technology and high labor intensity. Among the twenty top products on market dynamic considerations Pakistan has the scope of enhancing its share on textiles and clothing including leather, and primary commodities. With very low import intensity, adequate domestic production of raw materials at low cost, abundant supply of labor at competitive costs, the textile and clothing industry has Revealed Comparative advantage (RCA) greater than one and a Domestic Resource Coefficient (DRC) of less than one. These indicators show that Pakistan has the wherewithal to face competition in the world markets. The other policy indicator of export competitiveness i.e. Real effective exchange rate also shows the strength of Pakistani exports in relation to its competitors in third country markets. The removal of quota will eliminate the quota rents being collected by some of the exporters in Pakistan further improving the price competitiveness of our products. The recent investment of almost $ 2 billion in acquisition of new state of the art machinery and equipment will replace the obsolete technology and upgrade the quality improving the productivity of Pakistani textiles.

Lower transport and communication costs and reduced trade and regulatory barriers have facilitated production sharing which is generally concentrated in labor-intensive activities. Production sharing allows firms to exploit the comparative advantage specific to the production of particular components, including scale economies and differences in labor-costs across countries. Firms determine the location of the production of components according to their own factor intensity and costs rather than the average factor intensity and cost of the end-product.

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Where international production networks are organized on the basis of subcontracting, the lead firm usually concentrates on Research and Development, design, finance, logistics and marketing but is not always involved in production activities. Pakistan can be the production platform for those labor intensive processes in high and medium technology sectors in the overall context of an international or regional network. This applies both to merchandise exports as well as services.

Space for multinational companies to work in Pakistan

As proved above Pakistan has a lot of attraction for the worldwide investors to star the business and invest here.

Investment Opportunities in Telecom

Upgrading the Billing Systems Rural Telecommunications Value Added Services & Content Services Data Communications Internet Protocol Television Vehicle Tracking System 3 G / 4 G Networks Low Fixed Line Teledensity Advent of Mobile Banking M-Commerce Tele Medicine and Tele Sale & Purchase Mobile sets manufacturing Tele Marketing and Video Conferencing Network Solution Providers Underground Exchanges Telephone Exchanges with DMS Outsourcing and Franchise

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Investment Opportunities in IT

E- Government Projects IT Enabled Services Call Centers Back Office GIS Mapping (geographical information system) Software Design/ Testing Industrial Automation Projects Content Development Software Products Distance Learning / IT Education & Training Electronic Media Information Security Bureau Services Hardware and Internet Equipments.

IT & Telecom - Incentives

100% foreign equity allowed in software houses Minimum US $ 0.15 million investment is required in service sector Piracy laws to protect software Tax holiday on software exports till 2018 0-5% Custom Duty on imports of PME Initial Depreciation allowance is 50% of PME Cost.

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CONCLUSION:
The Pakistani government is taking seriously its role in promoting social responsibility and higher ethical conduct in business. Fundamental transformations are taking place in the political, institutional, economic, social, and gender-equality spheres in order to ensure transition to a modern Islamic state. Remarkable progress is taking place in infrastructure development, with new highways between Karachi, Lahore, and Islamabad. This is a direct result of private-sector investment driven by the promise of attractive rates of return. Continuing public and private investment is needed to bring infrastructure facilities up to a level that is competitive with more industrialized countries. Specific sectorsin particular, the IT industryare being promoted as engines of national economic growth. The World Bank report of 2010 rates Pakistan as the second best country in Asia Pacific in terms of "EASE TO DO BUSINESS". If proper attention is given to the international trade in Pakistan, it can yield extremely good results for country and a bring a positive impact on the economy of the country, but unfortunately the terrorism has inflicted its consequences on Pakistan and many foreign investors consider it unsafe to invest and do business in Pakistan. Once the war on terrorism will finish from Pakistan and political stability will come in the country, then the trade doors will open and Pakistan will prosper.

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References
http://en.wikipedia.org/wiki/International_trade http://www.globalent.org/ http://en.wikipedia.org/wiki/Economy_of_Pakistan http://www.tradingeconomics.com/pakistan/exports http://wiki.answers.com/Q/Major_imports_and_exports_of_Pakistan http://www.pakistanibusiness.com/pakistani-companies/multinational-companies-inpakistan-44.htm http://tribune.com.pk/story/280478/comparative-advantage-american-buyers-still-preferpakistani-apparel/

http://www.pakistaneconomist.com/issue2000/issue31/f&m3.htm