South Asia Investor Review

Pakistan Purchasing Managers Index (PMI), jointly launched by Habib Bank (HBL) and S&P Global, is showing sustained growth in manufacturing for the last several months.  It has been consistently above 50, indicating expansion. This indicator disagrees with contraction reported by Pakistan Bureau and Statistics (PBS) Large Scale Manufacturing (LSM) indicator. What accounts for this discrepancy? Is it because the LSM tracks only a subset of industries tracked by PMI? Is there a difference in methodology?  Pakistan PMI Trend. Source: S&P Global Here's one plausible explanation offered by analyst Humaira Qamar at HBL: "As per the Pakistan Bureau of Statistics, Large scale manufacturing (LSM) contracted 1.8% in the latter half of 2024. However, excluding the hefty decline in the low-weight furniture segment, LSM trended positively. Our PMI release suggests that the recovery has extended into 2025, with demand-side conditions taking cue from a sharp reduction in the policy r...

President Pervez Musharraf of Pakistan passed away this week. May his soul rest in peace. Amen. He was a true patriot who honestly served his country to the best of his ability. He strengthened his country's economy, society and military. Per capita incomes of Pakistanis doubled on his watch, lifting the country from a low-income to a middle-income country. His government liberalized media and telecommunications, leading to rapid growth in both industries.  President Musharraf dramatically accelerated his people's human development by investing heavily in education and healthcare. After what has transpired in recent years, most Pakistanis will remember his time in office as a golden age for the country.  President Pervez Musharraf 1943-2023 Higher education reform backed by huge increases in spending led to a large increase in college and university enrollment and graduation rates. He halved Pakistan's debt burden and doubled exports during his 8 years in office. Pakistan b...

Soaring demand for consumer electronics and low labor costs are attracting major global smartphone manufacturers like Samsung to Pakistan. In 2021, local manufacturers produced 25 million handsets, up a whopping 88% increase from 13 million produced in 2020. A key factor credited for this rapid production ramp-up is the new Mobile Device Manufacturing Policy announced and implemented by former Prime Minister Imran Khan's government in 2020. It imposes high tariffs on the import of mobile phone sets and offers tax rebates for local manufacturing. The policy set a 49% localization target by June 2023, including 10% localization of components on the motherboard and 10% localization of batteries.  Pakistan is forecast to be the world's 7th largest consumer market by 2030. The key to attracting more manufacturing in Pakistan lies in continuation of pro-investment policies and a measure of political stability.  Pakistan Going From Imports to Exports of Mobile Handsets. Sourc...

Prime Minister Imran Khan has effectively led Pakistan through multiple crises in the last 4 years. Khan inherited dangerously low forex reserves in 2018 which are now at  $23 billion, near the highest level in the nation's history. The COVID pandemic that hampered Pakistan's recovery has been handled well with the fully vaccinated rate for the eligible population at more than 75%. Not only has Khan deftly navigated his nation through these crises but his government has also revived the country's economy and grown exports by 26%.  Domestic savings rate recovered to nearly 17% after plunging to a low of 12% in 2018.  The year 2021 was a banner year for Pakistan's  technology startups  that raised over $350 million in funding, more than the amount raised in the previous 5 years. Manufacturing and construction industries are enjoying a boom last seen during the  Musharraf years  in 2000-2007.  Pakistan has pursued an independent foreign policy under ...

Manufacturing in Pakistan lags behind Bangladesh, India and Sri Lanka in terms of  manufacturing value added  per capita as well as per capita exports of manufactured products, according to  Competitive Industrial Performance Report 2020  released by United Nations Industrial Development Organization (UNIDO).  Pakistan's Competitive Industrial Performance. Source: UNIDO On the competitive Industrial Performance (CIP) Index, Pakistan ranks 82 among 152 countries, well behind India at 42,  Bangladesh  at 70 and Sri Lanka at 75. Only Maldives (144) and Nepal (135) rank lower than Pakistan. Bangladesh has built a very successful  garments manufacturing  and export business that rivals China's. The country is now focusing on building  mobile phones  and consumer electronics industry.   India's Competitive Industrial Performance. Source: UNIDO Only 1.3% of  Pakistan's manufacturing  is high-tech and 9% medium tech, bet...

Pakistan Federal Board of Revenue has recently announced that “Sales Tax and Income Tax at import stage has been drastically reduced in case of smartphones of Rs15,000 or below". This action was apparently taken after Digital Pakistan Initiative led by Tania Aidrus asked for it. It has come under fire from the country's nascent mobile phone and smartphone manufacturing industry which is producing low-cost mobile phones. Pakistan's mobile handset market is the 8th largest in the world. Current annual demand is for about 40 million units of which 13 million are assembled in Pakistan while the rest are imported, according to a report by Dunya News. The import bill for Fiscal Year 2020 is expected to be about $1.2 billion. Boosting it will save billions of dollars of precious foreign exchange. It will create tens of  thousands of jobs  and spawn new auxiliary manufacturing industries for chargers, headphones, USB cables, cases, etc.  In future, Pakistan could become a sign...

Pakistan's manufacturing sector is performing poorly relative to  Bangladesh  and India, according to the United Nations Industrial Development Organization 2018 report. UNIDO data shows that Pakistan's per capita  manufacturing  value added is not only lower than its neighbors' but it's also growing more slowly since 2010.  In fact, Pakistan's manufactured exports per capita have declined in the last decade. South Asia Manufacturing. Source: UNIDO IDR 2018 Industrial Development Report 2018: United Nations Industrial Development Organization, also called UNIDO, is a UN agency whose charter is to "promote and accelerate inclusive and sustainable industrial development (ISID) in Member States". It publishes an annual industrial development report that is "an established source of reference on industrial development. Previous editions have been examining the driving forces of industrialization and the positive factors that can lead to social i...