Pakistan’s Entrepreneurial Potential and Private Sector Development Discussed at a Roundtable by CSIS and Mishal Pakistan

Roundtable discussion on "Private Sector Development in Pakistan" by US think tank CSIS in Lahore chaired by Ms. Sadika Hameed,
fellow with Center for Strategic and International Studies (CSIS) and Mishal Pakistan.

Pakistan’s Entrepreneurial Potential and Private Sector Development Discussed at a Roundtable by CSIS and Mishal Pakistan.

“Pakistan presents a confluence of interest for both U.S. businesses and the people of Pakistan. Despite dire predictions, Pakistan’s economy has a number of structural factors that will translate investment into growth”; Sadika Hameed, Fellow with the Center for Strategic and International Studies (CSIS), said at a roundtable organized by CSIS and Mishal Pakistan. Ms. Hameed is an expert on competitiveness, private sector development, political risk and frontier markets.

CSIS is carrying out a series of roundtables and interviews to discuss the entrepreneurial potential and private sector development in Pakistan. This activity will result in a report for policy makers and the business community in the United Sates and Pakistan. The businesses in both countries will also be brought together through investors conferences in Washington DC and Pakistan as well.

Representatives of political parties, the business community, education, media, and civil society attended the roundtable.

The participants also discussed and agreed on addressing international business and media perceptions of Pakistan. International news coverage and public attention centers on the threats emanating from Pakistan and the strained relationship between the U.S. and Pakistani governments. This focus obscures: first Pakistan’s tremendous economic potential, with its 180 million potential consumers, rapidly growing private sector, second, location as a shipping hub, and third, one of the most favorable demographic age distributions in the world. Investment in Pakistan presents a confluence of interest for both U.S. businesses and the people of Pakistan. Despite dire predictions, Pakistan’s economy has a number of structural factors that will translate investment into growth.

Lack of access to finance in Pakistan also presents opportunities for financial investment. A very low percentage of Pakistani small and medium enterprises (7%) have bank loans. This figure stands in contrast to 32% of SMEs in Bangladesh and 33% in India, indicating potential for growth in the commercial lending sector. From a development perspective, small and medium enterprises are more able to rapidly increase employment than large firms and their local ties ensure that they both invest and operate locally, even in the face of security threats.

Foreign investors have another reason to invest in Pakistan. As Western investors seek to hedge against market volatility, they seek to diversify their investments and reduce exposure to any one market. Recent external research has examined the potential for Africa to provide regional diversification through its low market correlations with the United States and Europe. Research by Pakistani economists indicates that the market correlation with Pakistan is even lower (around 0.05). As banks and institutional investors try to limit their exposure to risk, Pakistani investments are likely to yield good returns and could shield investors from market fluctuations elsewhere.

In the longer term, existing U.S. government institutions for promoting trade, including the Overseas Private Investment Corporation and the Export-Import Bank, can change their priorities to include small and medium business growth in fragile countries, as the Ex-Im Bank has already begun to do. Such a policy could help U.S. companies invest in growing, but potentially risky countries, and at the same time further U.S. foreign policy priorities of poverty reduction and increased stability in fragile states. This approach would be especially appropriate for encouraging U.S. business growth in the commercial centers of Karachi and Lahore.

For 50 years, the Center for Strategic and International Studies (CSIS) has developed practical solutions to the world’s greatest challenges. CSIS scholars provide strategic insights and bipartisan policy solutions to help decision makers chart a course toward a better world.

CSIS is a bipartisan, nonprofit organization headquartered in Washington, D.C.  The Center’s 220 full-time staff and large network of affiliated scholars conduct research and analysis and develop policy initiatives that look to the future and anticipate change.