It would be tempting to describe 2020 with the Latin term annus horribilis, a year of disaster. While it was undoubtedly a dreadful year for most across the world, yet for Pakistanis there were some sparks of good cheer despite the pall of pervasive global gloom. The government’s deft handling of the pandemic minimized the economic fallout for the country, and it also did especially well in alleviating the hardships imposed by the lockdown on the poorest and most vulnerable sections of society. Pakistan also appears to have succeeded in keeping the collateral costs to a minimum – certainly at much lower levels than most comparable countries within the region and beyond.
As the “year from hell” ends, the economy in Pakistan shows signs of a smart V-shape recovery and almost all indicators in positive territory. With the ushering of a new decade, hope springs eternal in the breasts of a hard-pressed but hardy nation of 220 million. Therefore, the crystal ball is dusted off to discern top five opportunities, comprising events in 2021 that may provide cause for optimism. To each prospect of good tiding a probability estimate is assigned – with 10 being almost certain, and zero indicating there being no chance of the scenario playing out during the year.
While remaining hopeful, the possibility of unanticipated shocks can never be discounted. There is no dearth of risks and the top five threats for Pakistan are also identified, and assessed based on knowable factors and to the best judgment. For these also the same probability scale is applied to suggest their likelihood of occurrence.
While the opposition parties want to destabilize the government before the Senate elections, it is increasingly apparent that its efforts to unseat the current government are unlikely to be successful. Pakistan Tehreek Insaf (PTI) and its allies can be expected to win the Senate election by an overwhelming majority, which will not only ensure that the incumbent government would complete its constitutional term, but command the necessary parliamentary muscle to enact much required legislative changes. The prospect of greater stability and renewed focus carrying out structural economic changes will increase investor confidence. This is likely to mean an acceleration of the incipient recovery and greater flows of foreign direct investment (FDI). Long gestation investments will materialize as a consequence.
The country produces +20,000 IT graduates each year and they have helped launch up over 700 tech start-ups since 2010, the majority of which continue to be in business.
The government will be better positioned to undertake ambitious combination of policy and administrative reforms to institute a progressive tax regime, further rationalize tariff structure and expedite the process of divesting inefficient state-owned enterprises.
The China-Pakistan Economic Corridor (CPEC) is a pillar of Pakistan’s economic strategy in order to shape a new high growth economic region. Although China has undertaken a number of infrastructure development projects throughout the world its most ambitious projects are the China-Pakistan Economic Corridor (CPEC) and its corresponding One Belt and One Road (OBOR) initiatives taking place in Pakistan and Central Asia. China’s projects have already been very beneficial for Pakistan.
Aside from the business opportunities that are already being created in various parts of Pakistan touched by CPEC, the infrastructure is helping to take care of the need to develop infrastructure between Central Asia and South Asia, without Pakistan being required to lift a finger. As it is completed, Pakistan will be able to access Central Asian markets through Western China. New markets will create new opportunities for Pakistani and foreign investors and strongly drive the economy forward creating millions of jobs.
Pakistan must continue to reinforce strategic ties with China to not only bring in investments and increase the economic interdependence, but also to ensure unrestricted access to Central Asia. If Pakistan can convince the Central Asian republics to use Gwadar Port to access the markets of Middle East, South East Asia, and Africa, then Pakistan will be well on its way to being a regional trading hub.
Pakistan’s Information Communication Technology and IT-enabled services sector’s is shaping up. Exports in this sector have surged by 42 percent year on year to US $823 million during first three months (July-September) of FY 2020-21. The sector is one of the fastest growing sectors and expected to double in next three years to $7 billion, or to contribute almost 2 percent of GDP.
The country produces +20,000 IT graduates each year and they have helped launch up over 700 tech start-ups since 2010, the majority of which continue to be in business. Pakistan’s thriving freelance industry is ranked 4th globally in terms of number of freelancers engaged in software development and technology. While this demonstrates success of the IT sector, it also highlights potential availability of a rich and growing talent pool. There is clear headroom for growth of sufficiently large companies to absorb the growing number of skilled knowledge workers and provide them with gainful employment.
Javed Hassan has worked in senior executive positions both in the profit and non-profit sector in Pakistan and internationally. He’s an investment banker by training. Twitter: @javedhassan