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Being a market of 220 million by itself, Pakistan is home to the world's 6th largest population. The UNDP has termed Pakistan as the 2nd youngest country in the world as it has the largest number (64 percent) of population under 29 years of age.
Pakistan is one of the largest democracies in the world with an elected government, strong institutions, vibrant media, diverse cultures and emerging economy. Given the size of the country, coupled with growing disposable income and a changing lifestyle, Pakistan is primed for cooperation and new investments.
With a vibrant and progressing economy, Pakistan ranks among the top fifty nations in different fields. With a nominal GDP of USD 270 billion (2020), Pakistan's economy is predominantly services-based. Agriculture (crops, livestock, fisheries and forestry) accounts for 18.8 percent of the GDP, manufacturing and industry – for 20.9 percent, while the services sector accounts for 60.2 percent of the GDP. Different international organizations and think tanks have predicted Pakistan's economy to be on a positive trajectory. Pakistan is a developing country and is one of the "Next Eleven countries", after G20 and BRICS. It is projected to be the 22nd largest economy by 2023.
Pakistan is amongst the world's top ten producers of wheat, cotton, sugarcane, mango, dates, oranges and rice. Major crops (wheat, rice, cotton and sugar cane) contribute around 4.9 percent, while minor crops contribute 2.1 percent to the country's total GDP.
Boasting the 8th largest total cattle inventory in the world and being the 4th world largest milk producer, the livestock sector contributes 11 percent to the GDP (60.5 percent in the agriculture sector) and employs approximately 35 million people. Fisheries and forestry sectors each contribute an estimated 0.4 percent to the GDP (2.1 percent in the agriculture sector).
Textile is the most important manufacturing sector in Pakistan. It contributes nearly 1/4th of the industrial value-added and employs about 40 percent of the industrial labor force. The ready-made garments industry has emerged as one of the important small-scale industries in Pakistan. These ready-made garments and products have large demand both at home and abroad and there is immense room for investment in this sector. Pakistan is the 4th largest producer and third largest consumer of cotton and 3rd in terms of yarn production in the world.
Large-scale manufacturing has 66 percent of the sectoral share with textile, cement, sports goods, leather products, fertilizers, chemicals, surgical instruments and pharmaceuticals having the major presence. Pakistan has also been bestowed with rich natural resources which are still largely untapped as the country has big deposits of gold/copper (3rd largest), coal (7th largest), salt (2nd largest), oil/gas (10th largest) along with a plethora of precious metals, gems and stones.
The country also has a burgeoning IT sector that is being constantly fed by a steady stream of more than 20,000 young professionals annually while exhibiting the trend for improved export performance. According to the US Technology Giant, Google, Pakistan is becoming a "Digital-First Country", paving new opportunities for businesses to digitally engage with consumers. Pakistan is the 3rd largest freelance online workforce. It holds huge potential for growth and investment in technology-enabled solutions, besides traditional sectors.
As per the "World in 2030" Report published by HSBC Global Research, Pakistan is ranked among the top countries that would be the driving force behind global economic growth during the years leading up to 2030.
Liberal investment regime
Pakistan follows a liberal investment regime and foreign investment promotion policy. The Government has taken a series of economic liberalization measures to make the country more attractive. Some of the highlights of the current Investment Policy include: equal treatment to local and foreign investors, all economic sectors open to FDI except a few specified restricted industries like arms and ammunition, explosives, radioactive substances, security printing, currency and mint; foreign equity up to 100 percent is allowed without any minimum requirement of investment. However, restrictions exist on foreign ownership of equity in certain sectors like airline, banking, media and agriculture. Likewise, remittances of royalty, technical and franchise fee, profits, dividends, and capital gains are allowed and Foreign Investment is fully protected by the Foreign Private Investment Act 1976 and Protection of Economic Reforms Act 1992. The World Bank improved Pakistan's position on the Ease of Doing Business Index by 28 points from 136 to 108.
Keeping in view the distinct advantages in terms of factors of production and enabling paraphernalia, the agro-processing, logistics, textile, housing and real estate, automobiles, IT, tourism & hospitality and alternative energy development are the sectors that hold the promise of high returns for prospective investors looking for long term future growth.
China-Pakistan Economic Corridor (CPEC)
CPEC is a flagship multi-billion dollar project of China's Belt and Road initiative that epitomizes Pak-China cooperation both in the national development of Pakistan and in overall regional growth. Starting in 2013, the project has already marshaled investment up to USD 62 billion and envisages a thoroughgoing development and revamp of the infrastructure and energy sector of Pakistan. With an array of projects already completed and the others moving ahead at full tilt, the concept is to connect Pakistan's southern seaports to the regions of Southern China by building an elaborate network of roads, railways and airports throughout Pakistan.
Augmented by the investments in the energy sector to meet Pakistan's growing industrial needs, it has also been planned to build nine Special Economic Zones with a special investment and tax regime. The project will provide an alternate and shortest route to landlocked Central Asian states, providing an impetus to their industries and trade. With an already well-developed infrastructure that is being further beefed up under the umbrella of CPEC, the investors get to benefit from the seamless transport and logistics facilities providing expeditious access to regional and international markets.
Pakistan is uniquely gifted with tourist attractions ranging from the majestic peaks in the north to virgin beaches in the south and from fertile alluvial plains to stretching deserts. Pakistan has some of the world's coolest resorts and is a hub to the world's tastiest foods. Home to ancient civilizations and cradle of many world religions, the country holds forth the promise for adventure, religious and archaeological/historical tourism. With the significant improvement in the security situation, its recognition in international media and keen interest of the present government to further develop the tourism sector has led to the emergence of numerous investment opportunities. The government has launched an E-visa facility for almost all countries commencing from April 2020.
Diplomatic relations between the two countries were established in 1994 and have grown at a faster pace since the opening of resident diplomatic missions by Belarus and Pakistan in each other's capitals in 2014 and 2015 respectively. In a relatively short time, both sides have laid down an elaborate legal framework for cooperation encompassing multiple spheres of bilateral interaction including but not limited to trade, economy, science and technology, education and defense, which is truly reflective of the political will of both leaderships to continue strengthening the ties.
Moreover, there is robust bilateral inter-parliamentary and inter-regional cooperation whereby in the latter case, the four provinces of Pakistan have been paired up with four regions of Belarus and the two capitals, i.e. Islamabad and Minsk have also been declared twin cities. Pakistan and Belarus closely coordinate at multilateral forums and regularly support each other's positions and candidatures to international organizations, which has become a veritably commendable feature of the bilateral relationship.
Established in 2015, Pakistan-Belarus Joint Commission on Trade and Economic Cooperation is the basic institutional mechanism for the development of bilateral trade and economic relations, which has held five sessions to date. Within the framework of the Joint Commission, there are Joint Working Groups for Cooperation in the fields of Industry, Agriculture, and Science and Technology. Besides, the two countries have several institutions to facilitate close business cooperation, which include Pakistan-Belarus Joint Business Council, Pakistan-Belarus Business and Investment Forum, Pakistan-Belarus Textile Forum and Pakistan-Belarus Agricultural Forum. Delegations from both sides also participate regularly in the main agricultural and industrial exhibitions held in both countries.
During the year 2020, the bilateral trade turnover between Pakistan and Belarus stood at USD 51.9 million with total exports of USD 15.2 million from Pakistan while the imports from Belarus stood at USD 36.7 million, resulting in a trade surplus of USD 21.5 million for Belarus. While the overall trade volume remains modest and needs to be revved up by the businesspersons of both sides, the fact that despite the pandemic, the bilateral trade registered an increase of 3.4 percent approximately, which, though paltry, is indicative of the encouraging potential for growth.
Rice, apparel, textiles, fruit, leather goods, sports equipment and surgical instruments are among the primary Pakistani exports to Belarus, whereas the latter mainly exports tractors and spare parts, fertilizers, chemicals, synthetic fibers and rubber articles. Home textiles, citrus, hosiery, men's clothes, medical instruments, fisheries and footwear are among the niches carrying the growth prospects for Pakistani exports. For the Belarusian exporters, the sizable scope for expansion lies in sectors like motor vehicles and parts, synthetic textile fabric, fertilizers, chemicals and low-fat milk powder.
With an increased focus of both governments to make the economic relationship commensurate with its true potential and to provide the businesses of the two sides the opportunities for gainful cooperation, the session of the Pakistan-Belarus Business Council was held in April 2021. During the open discussion, the participants negotiated possible interaction in the fields of food industry, agriculture, energy engineering, pharmaceuticals and surgical equipment production.
The pandemic and economy
The unexpected outbreak of COVID-19 has proved disastrous for the economies around the globe with some sectors buffeted more than others. Being a middle-income country with a sizable number of workers employed in the informal sector, Pakistan was faced with an unenviable choice between saving lives or livelihoods. While starting with complete lockdown, the government improvised quickly by the selective reopening of specific sectors thus slowly turning to fully functional mode. Thanks to the strategy of smart lockdown coupled with young population, Pakistan emerged from the pandemic largely unscathed in terms of human loss.
In a bid to provide social security net to shield a large number of its households from adversity due to lost incomes, the government of Pakistan announced approx. USD 8 billion multi-sectoral relief package that was spent to address the challenges arisen due to the outbreak of COVID-19. Moreover, industry-specific support measures were introduced to kick start the economy with the construction sector being a case in particular. A range of fiscal and monetary measures was put in place to provide the much-needed stimulus to the economy including but not limited to loans, grants, the moratorium on debt repayments, extension in settlement of import/export loans and lowering of the policy rate.
Steel, automobile, banking, insurance, aviation, education and tourism were amongst the worst-hit sectors. A few sectors like agriculture survived while those of textiles, cement and real estate made a quick rebound for the better after the initial jolts.
While the government has for the past several years focused on export-led growth; however, COVID-19 has exposed the vulnerabilities involved in trade and investment. The social and economic disruptions as a result threaten the present economic realities on one hand but also bring significant opportunities. In response, companies in multiple sectors are already transforming their products, processes, and business models. Amidst this situation, there are growth and investment opportunities that can be harnessed in food processing, consumer goods, logistics, entertainment and communications, financial services, eCommerce, EdTech, Health-Tech, textile, and tourism. In 2021, Pakistan's economy is expected to rebound and recoup for the loss of the previous year.
The materials have been provided by the Embassy of the Islamic Republic of Pakistan in the Republic of Belarus.