The Palgrave Handbook of Cross-Cultural Business Negotiation by Unknown

Author:Unknown
Language: eng
Format: epub, pdf
ISBN: 9783030002770
Publisher: Springer International Publishing

The Business Environment in Pakistan

Many factors affect a country’s business environment, including economic, social, political, technological, legal, and demographic factors. It is important to discuss Pakistan’s growth trajectory in order to understand the present business environment of the country. Historically, Pakistan followed a highly unpredictable trajectory of economic growth. Whereas in the 1960s Pakistan’s economic growth was in double digits, in the 1990s it was merely 2 percent. This unstable pattern is present even if one examines the last 20 years of growth. For example, comparing the period of 2013–2017 with that of 2008–2013, a substantial difference in growth pattern is evident. Similarly, the growth pattern of 2002–2008 is highly different than that of 2008–2013. Presently, the country’s per capita GDP is 1468 USD. Comparing its per capita GDP with its potential, it is obvious that the country is far behind what could have been achieved. One of the key reasons for Pakistan’s unstable growth and low per capita GDP is attributed to the lack of modern technologies for conducting business. The vast majority of businesses, in both the manufacturing and the services sectors, are using outdated and inefficient technologies which significantly raise their cost of doing business. Businesses generally attribute this dearth of modern technologies to the government. They claim that the government does not provide businesses low tariffs on the import of high-tech machinery and products. Another challenge that businesses presently face is the high cost of energy. A rough estimate shows that energy cost per unit in Pakistan is almost double as compared to India, Bangladesh, or Sri Lanka. To overcome the challenge of high energy costs, the government is developing economical energy-producing units.

The private sector plays a pivotal role in Pakistan’s growth, particularly since the beginning of the new millennium. For example, in the first decade of the new millennium, the pace of privatization increased, as did deregulation and the opening of the economy to the outside world. Significant adjustments were made in the tariff regime providing incentives for the development of large-scale industries such as automotive, banking, telecom, and consumer electronics. The government also gave considerable room to the financial sector to participate in the process of industrialization by making choices based on market considerations. This policy, however, was unsuccessful in instilling the necessary confidence in entrepreneurs to stand on their own feet and deal with the changes occurring in the global economic system without government intervention.

One of the biggest problems Pakistan has faced ever since its inception in 1947 is its fiscal deficit. This deficit distorts all policy efforts the government undertakes. For example, in 2016 the government attempted to pursue an expansionary monetary policy to stimulate growth. That same year, the government’s budget deficit grew due to insufficient tax collection and tax leakage. This resulted in a policy reversal; the government quickly changed its monetary policy to contractionary in order to borrow funds from banks for financing the deficit. These loans, taken from commercial banks at high interest rates, severely affected the industrial credit.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.