China Has a New Growth Challenger -- Pakistan: Andy Mukherjee

June 7 (Bloomberg) -- The world's second-fastest growing economy after China is no longer India. It's Pakistan.

According to figures released over the weekend by Pakistan's Prime Minister Shaukat Aziz, the $110 billion economy is estimated to have grown 8.4 percent in the current fiscal year that ends June 30. That compares with 9.5 percent expansion in China's gross domestic product last year, while India recorded 6.9 percent GDP growth in the 12 months ended March 31.

Now that Pakistan is within striking distance of China's growth, it aims to catch up. The growth target for the next fiscal year, as set out in the nation's annual budget yesterday, is as much as 8 percent, the same as Beijing's goal for the year.

That may be a trifle over optimistic. Pakistan isn't yet ready to sustain 8 percent growth year after year -- not until it can push up its savings rate, which is languishing at 14 percent of gross domestic product.

Inflation is at an eight-year high of 11 percent, a clear indication of an economy overheating from too much consumption. (China's problem is too much investment.)

Still, another year of strong growth is eminently achievable in Pakistan, provided the central bank can maneuver deftly to suppress inflationary expectations, even as the government goes ahead and steps up investments in public works.

Even a slightly less rapid expansion than this year would go a long way in boosting personal incomes, which have risen a very impressive 27 percent in U.S. dollar terms in the past two years.

Sept. 11 `Windfall'

Sure, Pakistan's retreat from the brink of a balance-of- payment crisis in 1999 had a lot to do with its Sept. 11 ``windfall,'' as some commentators termed it. Pakistan received grants and debt waivers and additional textile quotas from the Bush administration for helping it topple the Taliban in Afghanistan.

That was in 2001.

In 2005, what's helping sustain growth isn't U.S. largesse, but a revival of investor interest, which is evident from the list of bidders short-listed by the government for a proposed sale of 26 percent in state-owned Pakistan Telecommunication Co.

Bidders for the phone service provider, whose market value is about $5.5 billion, include telecom companies from Singapore, China, Malaysia, United Arab Emirates, Turkey and Saudi Arabia.

Yesterday, the benchmark Karachi Stock Exchange 100 Index plunged 1.5 percent after the government said it would delay the stake sale in the phone company because of pressure from labor unions. The government said it isn't scrapping the sale, which it now expects to go through by end-June.

2007 Election

The risk of such setbacks will remain, though the broad outlines of an investor-friendly regime should stay intact at least until 2007 when President Pervez Musharraf will, according to news reports, shed his army uniform and seek re-election as a civilian. Musharraf, an army general, took power in a coup in October 1999, and appointed himself president in June 2001.

While poverty still remains endemic, and only 18 percent of women aged 35 to 44 are part of the workforce (compared with 96 percent for males in the same age group), a new middle class has started to emerge in Pakistan.

Private consumption is up 17 percent from a year earlier in the 12 months ending June 30. Per capita income has surged to $736. Once Pakistan crosses the $1,000 threshold, like China did last year, it'll become a middle-income country with a lucrative domestic market of 154 million consumers.

Further income growth in Pakistan will require new jobs. And there's no sign yet of a reduction in urban unemployment, which has risen almost 3 percentage points in the last nine years to reach 9.7 percent. For now, GDP growth appears to be driven by more productive use of domestic capital, supplemented lately by an inflow of foreign savings. The current account now has a full- year deficit equal to 1.2 percent of gross domestic product.

Selling Bonds

Capital flows have been buoyant, as Aziz, a former executive at Citibank NA, has made good use of easy global liquidity conditions to raise cheap money from bond sales.

From investor such as Temasek Holdings Pte, the Singapore government's investment arm that bought 25 percent of a Pakistani bank in April, it helps that Pakistan's relations with India are improving as businesses in the two fast-growing economies press for closer ties. The neighbors have fought two of their three wars over Kashmir, a half-century-old dispute that remains unsettled.

There's help coming from another quarter. Raw cotton, yarn, cloth and garments account for three-fifths of Pakistan's overseas shipments. Along with China and India, Pakistan is widely expected to gain from the new quota-free system of global textile trade.

Yesterday's budget scrapped a 15 percent tax on materials imported by the country's textile industry.

A textile windfall would be a big bonus for an economy brimming with optimism, and quite deservedly. After all, it has been two decades since it last grew as fast as this year. Mimicking China's growth may be a tough act to follow, but Pakistan seems determined.


http://quote.bloomberg.com/apps/news?pid=1...id=a6zUufNih3as

thats centerineky good news for pakistan,i will be laughing at india if pakisan becomes a super power instead of india[insallah]

Another link to same article.................
http://www.china.org.cn/english/international/131220.htm

GOOOOOO PAKISTAN !!!

Pakistan .... my Pakistan. Love the news ..... in your face to those indians who were yapping around about their so called economy. Bite the dust!

And what benefit happens if Pakistan is caught lying? None. I hardly doubt that Mushy is lying about the economy. Also, in 2008, Bush may be gone, but Mr. Osama will still be hiding in the mountains and as long as he is out there, trust me, the US public will be after him and the only way to capture him would be with the help of Pakistan. Not only that, but by 2008 I hardly doubt Pakistan will be needing US money.

I really wouldn't say that the Democrats will be like, "War in Afghanistan is over." You have to remember that the victims of 9/11 have a POWERFUL lobby group in both political parties. They will never want to give up on hunting down bin Laden. As long as bin Laden remains at large, the US will have to cooperate with Pakistan whether they like it or not.

Can you please back up your claims?

Salam,



I think the article pretty much explains why US presence in form of an angle is not what is deriving the recent bullish trend in Pakistani economy. It surely is investor's confidence. Interestingly, we are not talking about the FDI, (the foreign direct investmen), but the local investment!! People are putting their money that they have been saving for a long time due to political uncertainty. Moreover, the biggest chunk of foreign money is comming from the Pakistanis living abroad who are sending estimately (just by government channels) 4 billion dollars.

I think the growth is sustainable and is very solid in its foundation. US elections or foreign developments will not effect it. In fact, it successfully absorbed the huge economic shocks recently, including: World Oil Price Serge, Tsunami and Post-Quota regeme. This is because Islamabad now has around 13 billion dollars of reserves, enough to sustain 10-12 months of exports.

Blessings.

in fact a 2.8% increase in usa economy is more in quantity then even a 100% increase in most countries of the earth.

True Slayer. But if Pakistan carries on with this trend. In a decade or two, it'll be somewhere

Look in this way ..............

If Pak added 10% of its foreign Reserve which is at present is 12 Billion doller , then it will add 1.2 Billion doller , which makes 13.2 ...

If another country which has 200 billion dollers , added 7 % to its reserve then it comes to 14 billion .............

so u can easily understand the mathematics......

if Pak economy grows from 1 to 2 then their is 100 % grown .......... but if any econoy growns from 10 to 11 then it is 10% growth.........

I think u are reading too much into this years growth projection.Let me get some facts straight.
There is a whole lot of difference between one quarter or one year of 8%+growth and sustained growth over decades which china has achieved.Dont forget that India achieved 10%+ growth for 3 straight quarters as well but could not sustain it
To achieve sustained growth both India and Pak need sustained investment.In Indias case we are seeing it in services sector but not where it matters the most namely infrastructure.In paks case raising investment rate will be even more difficult cse it has missed the IT and BPO boat
A growth rate of 8% and inflation of 11% only shows that growth is consumption driven and that too by a small proportion of the rich.This could be due to many factors like 9/11 windfall,investments by non resident pakistanis ,privitization etc.But 8% growthbenefitting only small proportion of rich only means more inflationary burden on poor

G-Unit is a playa' hater

like i said pakistan will outstrip indias growth rate once before...be assured pakistans GDP will outstrip indias.

also to add

we are 1 6th of india (population wise) hence we can be assured a better quality of life with less GDP.

also the investment is from foriegn companys aswell.. the overseas pakistanis are not investing anything near the investment of forieng companys.

the only city i can think of with lot of overseas paksitani investment is Mirpur AK.
the mirpuri peoples in england boght houses in the 90s and lots of them...now they are at a stage where they want to sell some of their UK assets and move them to pakistan..they have been in UK for a long time and any one from pakistan knows how dull UK is. they mostly want to return to the old way of life...(culturaly). they came here to make mony now they got mony...so there going back. hence we are seing a huge economic growth in Mirpur. new plazas all sorts..one canal land in the heart of comercial district is worth £4million (RS 40 carrore).

International Herald Tribune - http://www.iht.com/articles/2005/06/07/bloomberg/sxmuk.php

Commentary: Pakistan is poised to catch China in growth race

The world's second-fastest growing economy after China is no longer India. It's Pakistan. According to figures released over the weekend by the Pakistani prime minister, Shaukat Aziz, his country's $110 billion economy is estimated to have grown 8.4 percent in the year ending on June 30.

Among the world's 10 most-populous nations, that rate is exceeded only by China, where gross domestic product expanded 9.5 percent last year. India recorded 6.9 percent GDP growth in the 12 months to March 31.

Now that Pakistan is within striking distance of China's growth, it aims to catch up.

The growth target for the next fiscal year, as set out in the nation's annual budget on Monday, is as much as 8 percent, the same as Beijing's goal for the year.

That goal may be a trifle overoptimistic. Pakistan isn't yet ready to sustain 8 percent growth year after year - not until it can push up its savings rate, which is languishing at 14 percent of gross domestic product.

Inflation is at an eight-year high of 11 percent, a clear indication of an economy overheating from too much consumption. (China's problem is too much investment.)

Still, another year of strong growth is achievable in Pakistan, provided the central bank can deftly maneuver to suppress inflationary expectations, even as the government goes ahead and steps up investments in public works.

Even a slightly less rapid expansion than this year would go a long way in increasing personal incomes, which have risen a very impressive 27 percent in U.S. dollar terms in the past two years.

Sure, Pakistan's retreat from the brink of a balance-of-payment crisis in 1999 had a lot to do with its Sept. 11 "windfall," as some commentators termed it.

Pakistan received grants and debt waivers and additional textile quotas from the Bush administration for helping it topple the Taliban in Afghanistan. That was in 2001.

In 2005, what's helping sustain growth isn't U.S. largess but a revival of investor interest, which is evident from the list of bidders short-listed by the government for a proposed sale of 26 percent in Pakistan Telecommunication.

Bidders for the phone service provider, whose market value is about $5.5 billion, include telecom companies from Singapore, China, Malaysia, the United Arab Emirates, Turkey and Saudi Arabia.

On Monday, the Karachi Stock Exchange 100 index plunged 1.5 percent after the government said it would delay the stake sale in the phone company because of pressure from labor unions. The government said it was not scrapping the sale, which it now expects to go through by end-June.

The risk of such setbacks will remain, though the broad outlines of an investor-friendly regime should stay intact at least until 2007 when President Pervez Musharraf will, according to news reports, shed his army uniform and seek re-election as a civilian. Musharraf, an army general, took power in a coup in October 1999 and appointed himself president in June 2001.

While poverty still remains endemic, and only 18 percent of women aged 35 to 44 are part of the work force (compared with 96 percent for males in the same age group), a new middle class has started to emerge in Pakistan.

Private consumption is up 17 percent from a year earlier in the 12 months to June 30. Per capita income has surged to $736. Once Pakistan crosses the $1,000 threshold, as China did last year, it will become a middle-income country with a lucrative domestic market of 154 million consumers.

Further income growth in Pakistan will require new jobs. And there's no sign yet of a reduction in urban unemployment, which has risen almost 3 percentage points in the last nine years to reach 9.7 percent.

For now, GDP growth appears to be driven by more productive use of domestic capital, supplemented lately by an inflow of foreign savings. The current account now has a full-year deficit equal to 1.2 percent of gross domestic product.

Capital flows have been buoyant, as Aziz, the prime minister and a former executive at Citibank, has made good use of easy global liquidity conditions to raise cheap money from bond sales.

From investor such as Temasek Holdings, the Singaporean government's investment arm, which bought 25 percent of a Pakistani bank in April, it helps that Pakistan's relations with India are improving as businesses in the two fast-growing economies press for closer ties. The neighbors have fought two of their three wars over Kashmir, a half-century-old dispute that remains unsettled.

There's help coming from another quarter. Raw cotton, yarn, cloth and garments account for three-fifths of Pakistan's overseas shipments.

Along with China and India, Pakistan is widely expected to benefit from the new quota-free system of global textile trade.

Monday's budget scrapped a 15 percent tax on materials imported by the country's textile industry.

A textile windfall would be a big bonus for an economy brimming with optimism, and quite deservedly. After all, it has been two decades since it last grew as fast as this year. Mimicking China's growth may be a tough act to follow, but Pakistan seems determined.

FAK FA You are such an Idiot.. yes we can 'easily' understand mathematics but not the logic you are giving here. You Highness, you don't have any concept of Microeconomic and Macroeconomics, and therefore you should shut your big, fat, ugly, smelly bhindian mouth.. Did I squash your royal butt?? You a such a lier!!

China's New Growth Challenger Is Pakistan

http://en.chinabroadcast.cn/2238/2005-6-7/33@244762.htm

http://www2.chinadaily.com.cn/english/doc/...tent_449299.htm

Aray yaar this guy is gonnna shoot u one day

Well, thats good, because these people are bringing more $ coming into our economy from outside.

nice asessment sir, but I am afraid that it doesn't work that way. We aren't competing with anyone here. .
It is a great news for pakistan to have such a growth rate. Since it is meant for PAKISTAN only, no other nation should jump in and give remarks.