Comparative Analysis: Where Do We Stand?

This is an article I wrote back in 2007 for eVestment, a publication of the Rasala Publications Group, while I was working there.


Where exactly do we stand compared to our neighboring states and a developed Mid East giant? This indeed is a very interesting question. Often times, foreign investors ask themselves this very thing before they even think of investing in some off-shore or international project. The most critical factors they consider are our GDP, both real and nominal, as well as where exactly our various sectors stand, and what is our most booming industry. Throughout this article, we’ll try to answer these questions and we’ll see where Pakistan stands compared to three of its relative countries; India, Bangladesh, and the United Arab Emirates. The facts and figures quoted here are mostly from the CIA Factbook, as on December 12, 2007.

United Arab Emirates

  • Relatively young federal constitution formed on December 2nd, 1971
  • Has 10% of the world’s oil reserves and 4% of the world’s gas reserves; Lacks other natural resources
  • Nominal Domestic Product: AED679 billion (2007 Est.)
  • Nominal GDP Growth Rate: 13.2% (2007 Est.)
  • Per Capita Income: $33,397 (2007 Est.)
  • Real Growth Rate: 7.7% (2007 Est.)
  • Major contributors in the GDP
    • Services: 35%
    • Industry: 62.7%
    • Agriculture Sector: 2.3%
  • Consumer Price Index (CPI): 6% (2007 Est.)
  • Inflation: 8% (2007 Est.)
  • The Free Trade Agreement and the Trade and Investment Framework Agreement with the US
  • The manufacturing industry focuses mainly on production of chemicals and plastics
  • Dubai is home to about 70% of the country’s hotels; The city is a major tourist resort with several attractions such as the Dubai Shopping Festival and resorts
  • Recent estimations place the UAE’s IT Industry ahead of India
  • Recently started work on a research satellite, the Dubaisat-1; primarily to be used for civilian and scientific research for local, regional and international entities
  • The Dubai Silicon Oasis is the world’s largest purpose built high technology park developed specially for microelectronics and semiconductor research
  • The Finance and Banking sector is saturated but continues to expand; though over banked, still remains significantly profitable
  • The Dubai Financial Market also going considerably strong with the formation of multiple financial markets

India

  • Distributed into twenty-eight states and seven union territories
  • One of the largest economies in the world in purchasing power
  • Seventh largest country by geographic size; the second most populous country in the world, making it a huge human resource pool
  • Suffers from high poverty rates, illiteracy and malnutrition
  • Nominal Gross Domestic Product (GDP): $1.09 trillion (2007)
  • Nominal GDP Growth Rate: 9.4% (2007 Est.)
  • Per Capita Income: $820 (2007 Est.)
  • Real GDP Growth Rate: 3% (2007 Est.)
  • Major contributors in the GDP
    • Agriculture: 19.9%
    • Industry: 19.3%
    • Services: 60.7%
  • Inflation Rate: 6% (2007 Est.)
  • The Consumer Price Index (CPI): 8% (2007 Est.)
  • The agriculture sector has a very major share in employment
  • Telecom is also one of the largest industries in the country due, in part, to the high population and partly due to technology costs and infrastructure there
  • Most manufacturers operating in the country are running at full capacity
  • Many new factories will be ready in the coming two years
  • The Information Technology industry stands at around 40 billion dollars; India is the fastest growing IT hub in the world with a projected growth rate of 24-27 percent in 2007-08, it is growing more rapidly than the global industry
  • Outsourcing is also crucial for rapid growth of the country’s IT industry
  • Despite a complex tax structure, the country is looking at a telecom boom , with 7.5 million subscriptions every month
  • Expected to hit the 600 million subscribers mark in the next few years
  • Current tax structure poses a very serious problem; with around 28% to 30% taxes
  • Fifth largest energy consumer in the world
  • LPG consumption has grown due to high demands from the automobile sector and rising oil prices

Bangladesh

  • Distributed into six administrative divisions
  • Suffers from political instability and poverty
  • Nominal Gross Domestic Product (GDP): $69.21 billion (2006-07)
  • Nominal GDP Growth Rate: 9.8% (2007 Est.)
  • Per Capita Income: $550 (2007 Est.)
  • Real GDP Growth Rate: 6.4% (2007 Est.)
  • Major contributors in the GDP
    • Agriculture: 19.9%
    • Industry: 20.6%
    • Services: 59.5%
  • Inflation Rate: 7.2% (2007 Est.)
  • The agriculture sector employs two-thirds of the population
  • Frequent cyclones and floods cause havoc and constrict growth
  • Primary exports are Rice and Jute
  • The ready-made garment industry is the largest contributor to the total exports, estimated to be somewhere around 75%, and employs 2.2 million low-wage workers
  • Exports of the garment industry expected to reach $15 billion by 2011 according to the Bangladesh Garments Manufacturers and Exporters Association (BGMEA)
  • The Natural Gas sector has seen considerable foreign direct investment
  • Negotiated oil and gas exploration with foreign firms
  • Labor and services remain the major contributors to the GDP in the form of outsourced labor and remittances

Pakistan

  • Distributed into four provinces and a capital territory and federally administered tribal areas, and Azad Kashmir
  • Nominal Gross Domestic Product (GDP): $127.02 billion (2006-07)
  • Nominal GDP Growth Rate: 7% (2007 Est.)
  • Per Capita Income: $808 (2007 Est.)
  • Real GDP Growth Rate: 7.0% (2007 Est.)
  • Major contributors in the GDP
    • Agriculture: 20.9%
    • Industry: 25.8%
    • Services: 53.3%
  • Inflation Rate: 7.7% (2007 Est.)
  • Plagued by political instability and poverty
  • Manufacturing and Financial services sectors show strong growth
  • Inflation on the rise
  • Non agricultural sectors growing
  • Karachi Stock Exchange soaring
  • Large amounts of Foreign Direct Investment
  • Telecom, Software, automotive, cement, textiles, fertilizer, steel, and ship building industries are top performers
  • Aerospace industry is also growing
  • Free Trade Agreement with China in 2006
  • Tourism is also a growing industry

Comparative Analysis

The development of a child takes years of care and attention, and a lot of guidance. In time, a child learns his first words, and takes his first steps. He falls, but stands up again, with proper guidance and care, he learns to run, and speak. Eventually, he learns reasoning, and develops into a fully grown adult.

Similarly, a country develops over time, with a lot of care and attention, and in some cases, guidance. It gradually learns to speak and develops a voice, and learns to walk. It falls, but learns how to get back up. Over time, it learns how to reason, and run, and becomes a mature, sensible and developed nation. And just as we continue to learn and develop, so too does a country.

Some countries develop more quickly than others, depending on the support they have, and the natural resources they have at their disposal. When we look at the UAE, we see a highly mature yet still developing country with an extensive infrastructure, and well-planned cities, joined together with a very effective transportation system.

Compared to the other three countries in our comparative analysis, it is no doubt the best developed country around. How did it get there? With a lot of oil and natural gas resources, and a lot of well-planned projects. Though all four countries, the United Arab Emirates, India, Bangladesh, and Pakistan, have reservoirs of natural gas and oil, however, only the Emirates has tapped its reservoirs so far and gained benefit from them. Very recently though, several international companies have started projects in the South East Asian states, to explore the coasts and other areas of the countries for gas reservoirs.

Oil exploration is continuing in all four states, however the Emirates has almost 10% of the world’s oil reserves and 4% of the world’s gas reserves, and it is one of the major exporters of oil and gas in the world.

The Free Trade Agreement between the UAE and the US has considerably boosted trade between the two countries. Additionally, an Investment Framework Agreement has also bolstered foreign investment from the US and has considerably sped up the developments of the country.

As part of a SAARC initiative, India, Pakistan, and Bangladesh have signed onto the South Asia Free Trade Agreement (SAFTA) that eliminated the duties on practically every product by the year 2016. Similarly, Pakistan has also signed a Free Trade Agreement with China in 2006, and has considerably improved bilateral trade between the two countries over the past year. Due to these trade agreements, these states have considerably streamlined their trading activities and have added to the growth of their economies.

Developing countries with stable economies and strong growth are first choices for foreign investment. Diversification is essential for maintaining a stable economy, so fluctuations in one economic sector don’t destabilize the entire economy. The UAE, despite successfully diversifying its economy, still relies heavily on oil and gas output (around 30% of the GDP). Despite this, the economy of the country is still relatively investor friendly and foreign investment is encouraged.

India however has a very diverse economy with a relatively heavy reliance on services and it is showing tremendous growth. The stability of the economy is entirely due to its diversification and hence is one of the strongest economies among the developing countries.

Bangladesh’s economy is also relatively diverse with a reliance on various services and rice exports, and is showing good growth, with a stable growth rate. Though its growth rate peaked during the seventies, it proved unsustainable and gradually came back down to more sustainable levels.

Despite being plagued by political instability and a number of confrontations with a neighboring country, Pakistan is still developing very rapidly and is showing extremely strong growth and stability despite several adverse events occurring around the globe. Proving its resilience, the country’s economy has continued to grow through severe riots in the commercial hub, Karachi, a severe drought, one of the deadliest and most devastating earthquakes registered.

The Gross Domestic Product or GDP of the Emirates stands at $185 billion and is growing quite rapidly. Despite having an 8% inflation rate, the per capita income, at $33,397, is comparable to those of the most developed countries in the world. The high inflation rate is expected to rise in the near future and is a very serious problem for the country.

India’s GDP stands at over $1 trillion, and is the 12th highest in the world. With a very strong economic backbone, India’s inflation stands at a mere 6%, but due to the large population, the per capita income stands at $820. The reason for such a high GDP is the diversity of India’s economy and its reliance on services and its high numbers of educated, English speaking youth.

Bangladesh is showing signs of very stable growth as its GDP is gradually growing at 9.8% and according to recent estimates, is at $69.21 billion. The high inflation rate, 7.2%, is a considerable issue but with a strong services sector and outsourced labor, the country is well on its way to development.

The Pakistani economy is showing strong, sustained growth at 7% and superb resilience in light of high political instability and adverse occurrences. The GDP is standing at $127.02 billion and the per capita income is at $808 according to 2007 estimates. However, inflation, at 7.7%, is a very substantial risk that needs to be countered.

The agriculture sector of the UAE constitutes around 2.3% of their GDP and is very small as compared to other Middle Eastern countries. The country fulfills its agricultural needs as imports from Vietnam. With the high volumes of imports, the UAE ranks high in the Vietnam’s export markets. Ras Al Khaimah is the agricultural center of the country with dates being the major exports. Fujairah is considered to have farming potential and plans are under way to develop the emirate.

The Indian agricultural sector constitutes around 19.9% of the GDP. Though this percentage is relatively low, it is still a considerably large volume. The country ranks second in worldwide farming output. However, the country has a lot of potential as with improvements in irrigation and the adoption of modern farming techniques and technology will tremendously increase crop yields. The major exports of India are rice, wheat, dried vegetables, sugar cane and cotton. Additionally, this employs over 60% of the country’s labor force.

Bangladesh exports primarily rice and jute, however the agricultural sector still constitutes almost 20% of their GDP. The sector employs over two-thirds of the population and has seen restricted growth because of climatic conditions such as cyclones and floods. The country has an abundance of water; hence rice farming and fishing are the primary products of the country.

The agricultural sector of Pakistan contributes about 20.9% to the GDP and is a very strong sector in the country. Primary exports are cotton, wheat, rice, sugarcane, fruits, and vegetables.

Comparing the agricultural sectors of these four countries, we see that the sector can grow considerably with the use of technology. The primary reason for low yields is either an irrigation problem, or the lack of farming technology. Additionally, with the introduction of biotechnology, all four countries can improve their agricultural output considerably.

The application of technology has considerably improved yields in several developed countries. The agricultural sector has a considerable impact on the economy of a country, regardless of how diverse it may be.

The services sector is a very major player in today’s high tech times. With financial services and information technology being the top players in this sector, Pakistan is gradually developing its services industry and it currently stands at around 53% of the GDP.

With the increase in foreign investment and developments by local companies, the country’s services sector is very diverse. As several telecommunication companies operating in the country, the sector has seen tremendous growth in the past few years and continues to grow with more foreign investment coming in.

Additionally, the IT industry is one of the fastest growing industries in the country and is continuously expanding. With several multinational IT companies already operating in the country, and several others inching closer, the Pakistan’s IT industry is being considered one of the largest markets and industries in the world in terms of potential. The aerospace industry is also growing and is a positive effort towards revenue generation.

The financial services and investment sector has seen considerable growth as well, with several foreign banking institutions operating in the country and the soaring Karachi Stock Exchange.

According to Christopher Armitage, Area Vice President, UK & Ireland, Teradata, “Our expectation is that it will grow tremendously. The economy has been growing and the banking and IT sectors have seen substantial growth, with so many international financial institutions coming in. The Pakistani market will continue to grow.”

Bangladesh also relies heavily on the services industry. It constitutes almost 60% of the GDP and is a top revenue generator for the country. The major contributors of this sector are outsourced labor and remittances.

India too relies quite heavily on its service industry and it constitutes 60.7% of the country’s GDP. With the developments in the telecom and IT industries, they are the major contributors in the sector. With an IT industry that stands at $40 billion, and a projected growth rate of over 24%, India is becoming a very major IT industry and is growing more rapidly than the global industry. Additionally, outsourcing has played a very major role for the country, as India has a number of professionals specially focusing on fields such as biotechnology and nanotechnology.

Although India has a complex tax structure for the telecom industry, it is still seeing considerable growth with 7.5 million subscriptions every month. With such a high consumer base, and such a large populous, India is one of the largest telecom markets in the world.

With the development of multiple financial markets and the Dubai Financial Market, the United Arab Emirates has one of the strongest finance industries in the world. The country is said to be over-banked, as there are several banks operating in the country, however, the industry still continues to grow. Additionally, re-exporting is also a very major contributor in over all revenues.

Recent estimations put the Emirates’ IT industry ahead of India’s. The development of the Dubai Silicon Oasis, the world’s largest purpose-built high-technology park, has given the country a distinct edge over the Indian IT industry. The technology park will focus microelectronics and semiconductor research. Additionally, the United Arab Emirates is developing a research satellite, the DubaiSat-1, which will be used for civilian and scientific research for both local and international entities.

The tourism industry is also a major contributor in the service sector as Dubai, is a very popular tourist destination, especially because of its various resorts and the annual Dubai Shopping Festival.

The industrial sector of the UAE relies primarily on Oil and Gas exports; however there are several factories in the country but the manufacturing industry is primarily focusing on chemicals and plastics. The government has several programs in place for the diversification of their GDP but the country still relies heavily on oil and gas.

Dubai is one of the largest aluminum smelters in the world and the major imports in the last few years have been manufactured goods, machinery, and transportation equipment. These imports however are beneficial in the long term as they will be used for further production.

Dubai also has over 200 factories operating in the Jebel Ali complex. The complex has a deep water port and a free trade zone which is the re-export hub of the country. The steel fabrication unit and the aluminum smelter there are considerable revenue earners for the emirate.

India has the fourth largest coal reserves in the world, and has several mineral deposits, including oil reserves; however, the oil mined from those reserves meets 25% of the country’s demands. India is the fifth largest energy consumer in the world, and due to the growing energy demands, relies heavily on coal and oil imports for energy generation. India does have significant renewable energy resources such as solar, wind and biofuels. They are currently researching the applicability of such energy sources.

Being the fourteenth in worldwide industry output, they have a number of fast moving consumer goods manufacturers operating in the country, as well as several other product manufacturers. There are several automobile manufacturers operating in the country, and most have set up assembly plants there.

Bangladesh has a very lucrative ready-made garment industry, contributing around 75% of the total exports. The natural gas sector has been given considerable attention and has received significant foreign direct investment. The government has negotiated oil and gas exploration deals with several foreign firms and is looking into the mining of other mineral resources as well.

The ready-made garment industry in Bangladesh is very popular among the people as over 2 million people have been employed in the sector. With low-wage labor, the country is very popular among garment brands. The industry is expected to reach $15 billion by 2011.

Pakistan’s industrial sector has seen tremendous growth over the last few years. The industrial sector accounts for almost 26% of the GDP and is rapidly growing. Apparel, textiles, and cement manufacturing industries have grown considerably and are among the top industries in the country.

Ship building is also a major revenue generator for the country. Earlier this year, the government has approved plans to develop two new shipyards which would be able to accommodate larger vessels. As this industry is labor intensive, and would employ a large number of workers and support several supplementary industries.

The salt range in Punjab has large deposits of pure salt and rock salt is one of the major exports of the country. The Balochistan province is rich in mineral deposits ranging from copper to gold. In early 2006, major copper and gold reserves were discovered in the province and mining projects have estimated the value of the reserves to be somewhere around $65 billion.

Additionally, Pakistan has a number of significant gypsum deposits in various areas in the North West Frontier Province, and that accounts for more than 70% of the marble production in the country. The Sui area has considerable deposits of natural gas, and is being developed to benefit from the reservoirs.

The government has started several projects to develop the industrial sector of the country, and is gradually building up the manufacturing sector considerably. According to the Asian Development Bank “Outlook 2007” report, Pakistan’s economy will show constant growth rates of around 7% with the top performers being manufacturing, exports, and consumer expenditure.

A lot of nurturing care and guidance make a lot of difference in the development of a child. The same holds true for a country. If we look at the facts and figures, we will see a lot of potential in the various industries and sectors; however, we must strive to benefit from that potential.

Having gone through several years of decadence, and several shocking events in the past few years, Pakistan’s economy has shown a very high level of resilience, and stability. This stability is what gives us an edge, and gives us room to grow.

At the end of the day, we all want one thing; a prosperous Pakistan.





Submit a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: