Nestle - Zaka (79)
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Transcript of Nestle - Zaka (79)
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September 2006
Pakistan An Economic Turnaround
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1
International
isolation
- Exports doubled
- FX risen five fold- Stable currency- Annual FDI doubled
Pakistans Turnaround Synopsis
Historical Bottlenecks Late 1990s
Highly
sanctioned
Near-zero
GDP growth
Threat of
sovereigndefault
Deep
recession
A Reinvigorated Tiger
- Sanctions removed
- Increased integrationwith global economy
- Growth quadrupledto 78%
- Increased wealthlevels
- Growing middle class
- Fiscal deficit halved- Inflation contained
- Recent internationalsovereign bonds
issues oversubscribed- KSE: one of the bestperforming markets
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2
5.7
4.7
5.4
6.6
Pakistan ASEAN Latin America MENA
142
161
207
96
1
25
7282
111
182
3.1
8.2
8.4
6.4
5.1
6.68.07.87.4
2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E
Nominal GDP (US$ billion) Real GDP Growth (%)
Source: Pakistan Ministry of Finance, Economist Intelligence Unit, Abraaj Analysis
The Growth Story
No l ( $ b ll o ) & l o h (%)
g p d d u bl o o g o h
One of the fastest growing economy in Asia
Expected to surpass the US$ 200 billion mark by 2010
l o h 0 (%)
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3
31
1
1
,
,
, 3,
3,
, , 1
1,
,
1
3
1
Source: Economist Intelligence Unit, Pakistan Federal Bureau of Statistics
o
%
ddl
% H
gh
%
The Growth Story (contd)
Weal h level have increased and a large middle-class is emerging
GDP per Capita ( $ PPP) Household Income Distribution (%)
Rising disposable income
Increasing income distribution largely a result of decreasing unemployment
Accelerating income growth across lower and middle segments of population
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4
9.2 9.1
11.2
12.3
14.4
16.5
2001 2002 2003 2004 2005 2006
Source: Economic Intelligence Unit
13.2
36.229.7
106.1
Pakistan China Indonesia Malaysia
The Growth Story (contd)
Exports have become competitive and almost doubled in last five years
Exports ( $billion) Exports (%of GDP),200
Low cost advantage spurring exports
Broadening geographical reach and more access to US, EU and UAE markets
Potential to increase and diversify target countries
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5Source: Pakistan Ministry of Finance, Economic Intelligence Unit
322485
798
1,524
3,521
949
2001 2002 2003 2004 2005 200
The Growth Story (contd)
International investors have begun to take notice of the Pakistan story,ho ever significantupside remains as FDI flo s are still farbelo regionallevels
Foreign Direct Investment ( $ million) Foreign Direct Investment (%of GDP),200
2
Pakistan Singapore India UAE
Opening up of economy leading to strong foreign interest
FDI inflow more than doubled in 2006
Broad based inflow across sectors
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6
47
46
44
36
34
38
2001 2002 2003 2004 2005 2006
Source: Pakistan Ministry of Finance, Economic Intelligence Unit
The Growth Story (contd)
Significant decline in externaldebt
External Debt (%of GDP)
Consistent decline in external debt / GDP ratio
Concerted effort to move away from poorly structured high-interest debt
Allowing increasing government expenditure on value-added projects
External Debt (%of GDP),2006
34.0
.1
16.0
30.8
Pakistan ingapore India AE
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7Source: Pakistan Ministry of Finance, Economic Intelligence Unit
2.1
4.8
9.8
12.613.1
12.3
2001 2002 2003 2004 2005 2006
The Growth Story (contd)
Rapidly increasing foreign exchange reserves and a stable currency
Foreign Exchange Reserves (US$billion)
1!159
!8
59!157
!258 ! 5
0 ! 9
2001 2002 2003 2004 2005 200
Exchange Rate (Year-end, PKR:US$)
Strong remittance flow and growing exports leading to accumulation of foreign reserves
Reserves providing currency stability
Standard & Poors upgrade long-term local and foreign rating
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Fiscal Deficit (%of GDP)
4"3 4
"3
3 " 7
3 " 2
3 " 4
2 " 4
2001 2002 2003 2004 200#
2006*
6 16 3
4 8
3 2 3 1
4 0
2001 2002 2003 2004 200 2006
*Excluding earthquake-related spending
Source: Pakistan Ministry of Finance, State Bank of Pakistan
The Turnaround Strategy
Externaldebt re-profiling and fiscal reforms were at the centre of the multi-faceted strategy
Interest Payments (%of GDP)
Restructuring and debt write-off leading to reduction in interest payment
Improved stability of economy; manageable fiscal deficit
Recent hike largely due to absorption of high oil prices
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A dynamic privatization program
Strong political support
3,5$ %
34317
%
18
558671
33
21
7
$
12
2001 2002 2003 2004 2005 T2006
Va& '
e(
f P) 0vat
0zat
0
(
n1 2
S3
4 0 & & 0
(
n5 6 ' 4 7
e)
(
f8
ea&s
Company Sector Company Sector
Pak9 stan Pet @ A B eC
D O9 B & Gas Mo @ afcoIndC
st @ 9 es, Fa 9 s IndC
st @ y &Rea B Estate
Pak9 stan State O9 B O9 B & Gas Lya B B pC
@Che D 9 ca B
Fe @ t 9 B 9 ze@Che D 9 ca B s
SC
9Southe @ n GasCo O9 B & Gas Haza@ a Phosphate Fe @ te @ Indust @ y &
Rea B Estate
Su9
E
o@
the@
n Gas P9
peB 9
ne O9 B
& Gas ToD
ato Paste PB
ant Indust@
y &Rea B Estate
Eat
9 ona B Invest D ent T@ ust F9 nanc9 a B Pak9 stan Tou@ 9 sD F
eve B op D ent Co@ p.Tou@ 9 sD
State L9 fe Insu@ ance Co. F9 nanc9 a B S 9 ndh Eng 9 nee @ 9 ng Const @ uct 9 on
Fa 9 saB a G ad Elect @ 9 cSupplyCo
H t 9 lities HeavyMechanicalCoD plex, Taxila
Indust @ y
Genco1I
JaD sho@ o) H tilities HeavyElect @ icalCoD plex,
Hatta @Powe @
Peshawa @ Elect @ ic Supply
Co
Htilities Pakistan Machine Tool
Facto@ y,Ka @ achiIndust @ y
Eational Powe @ Con Co H tilities Se @ vice Inte @ national
Hotel,Laho@ eSale ofLand
Source: Privatization Commission of Pakistan
Privatizations (US$ million) Current Privatization Pipeline
The Turnaround Strategy (contd)
Privatizations was another key focus
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10Source: Pakistan Ministry of Finance, Economic Intelligence Unit
67.863.64.
40.5
Pakistan Sin a re In ia AE
17
47
30
46
10
.7x
. x7.7x
12. x
4.4x
2002 2003 2004 2005 D2006*
MarketP aQ
itali R atiS
n
T
railinU
P/ERatiS
The Turnaround Strategy
Financial sector reforms catalyzed economic transformation
Bank Lending(%of GDP),2006 Market Capitalization (US$billion)& P/ERatio(times)
Financial sector transformation was the main driver of economic growth
Increased availability of credit for all segments of the economy
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InvestmentPolicy &Environment
RegulatoryFramework
Strengtheningof the institutional capacity of a numberof independent regulatory bodies in Pakistan thathave developed management structures, technical expertise, technology and enforcement capacitycompatible with internationalbest practices
Government is playing an effective role to transparently execute and institutionalize regulations designedto win the confidence of investors andgeneralpublic
ll sectors are open to FDI with equal treatment oflocal and foreign investors
100% foreign equity allowed, and royalties, franchise fees, capital,profits,dividends etc all fully repatriable
ttractive tax/ tariff incentives package
Low cost ofdoingbusiness,one-window facilitation
Reduction in corporate tax rate from 39% in 2005 to35%by 2007 forprivate companies
PowerDevolution
Source: Pakistan Board of Investment
The Turnaround Strategy
Creation of an enabling andgoverned economic framework
Policy Description
Transferringpowers and responsibilities, including those related to social services from the federal andprovincialgovernments tolocallevels
Strengtheninggovernance by increasingdecentralization, transparency, accountability of administrativeoperations, andpeoples participation in theirlocal affairs
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Level7,Emirates Towers Offices, P.O. Box504905, Dubai, U.A.E.
Tel.97143191500 Fax97143191600
www.abraaj.com
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