Goldman Sachs Bullish on Pakistan
Ron Rowland, a researcher at Weiss Research, believes that the world is going to hear a lot more about the "Next 11", a group of 11 nations beyond the four "BRIC" nations of Brazil, Russia, India and China. Goldman Sachs "Next 11" group includes Mexico, Nigeria, Egypt, Turkey, Iran, Pakistan, Bangladesh, Indonesia, Vietnam, South Korea and Philippines. Like BRICs, the rationale for the selection of N-11 is a good-size and growing population with a modern industrial base for a critical mass: The ability to produce consumer goods, and the consumers who can afford to buy them. Having natural resources, such as oil, in your back yard helps too. All of this creates the potential for major consumer and business growth. And the investment opportunities — for those who are patient and do their homework — could be enormous!
However, except for population and good economic potential, the N-11 are a diverse group in terms of their level of economic and market development as well as integration in the world economy. As in the case of BRICs, the authors of the concept, Goldman Sachs Consulting Group, have used variables grouped under Macroeconomic stability, Macroeconomic conditions, Technological capabilities, Human capital and Political conditions to determine the speed with which N-11 will be able to converge or catch up with the developed economies. Indonesia, Mexico and Turkey are three of the N 11 nations are already members of the Group of 20 (G20) nations. The rest of the N11 have the potential to join the group of the twenty largest economies of the world in the next few decades.
Comparing Pakistan with other N-11 countries in 2009, we find that it is only second to Indonesia in terms of population. However, in terms of the size of GDP, it is in the middle of pack, ahead of Bangladesh, Egypt, Nigeria, Philippines and Vietnam. All of this points to the potential Pakistan has to become a major economy based on its population size and demographics in the years to come.
Goldman Sachs report on "Next 11" projects Pakistan's rank moving up from the 26th largest now to the 18th largest economy in the world by 2025. In this context of Pakistan's tremendous economic potential as outlined in the report, there is considerable interest among individual US investors looking for opportunities to invest in Pakistan stocks. Unfortunately, there are no pure-play mutual funds investing exclusively in Pakistan. However, in addition to Franklin Templeton Funds, there are at least two other companies specializing in Asian economies that invest part of the portfolio in Pakistan along with India, Sri Lanka and other countries in Asia. These companies are Matthews Funds and Eaton Vance Funds.
Eaton Vance has Eaton Vance Greater India A Fund(ETGIX) that describes itself as follows: The investment seeks long-term capital appreciation. The fund normally invests at least 80% of net assets in equity securities of companies in India and surrounding countries of the Indian subcontinent. At least 50% of total assets will be invested in equity securities of Indian companies, and no more than 5% of total assets will be invested in companies located in countries other than India, Pakistan or Sri Lanka. The fund invests in companies with a broad range of market capitalizations, including smaller companies.
Matthews Asia Funds has Matthews Asia Pacific Equity Income Fund (MAPIX) which describes its geographic focus as follows: The Asia Pacific Region, which includes Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
It is heartening to see that top international investment professionals and firms continue to have faith in Pakistan's growth potential. To sustain and increase investor interest, it is absolutely essential that Pakistanis strive for a measure of peace and stability. The nation must also continue to increase the necessary investments in developing its human capital and infrastructure to support continued expansion of the economy and to realize the full potential of the country.
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