UnlockingTrue potentialBoosting Pakistan’s Private Sector

Saad Amanullah KhanVice President ABC

HEALTHYHOW

IS OUR

What is RAISINGits temperature ?

LOWEST INVESTMENT IN 40 YEARS

SLOW DOWN IN ECONOMIC GROWTH

DISMAL GROWTH IN LARGE SCALE MANUFACTURING

UNEMPLOYEMENT ROSE

INFLATION ACCELERATED

PROVERTY INCREASED

FISCAL DEFICIT SURGED

FDI (US$ M) DECLINED

POST 2007

…. and more

PUBLIC SECTOR BLEEDING PROFUSELYRs. 450 Billion estimated to be its combined losses

What isKeeping it

NORMAL ?

37o

CURRENT ACCOUNT DEFICIT TURNED SURPLUS

FLUCTUATING YET RISING EXPORTS

?Judgment still

PENDING

GROWING IMPORTS

PUBLIC DEBT as % of GDP

EXTERNAL DEBT & LIABILITIES as % of Forex Earnings

EXPANSION OF TAX NET

ISFACIN

GSERIO

USISSUE

S

MUSTFIX !

INLFATION

ImproveSecurity andLaw & Order

Improve & FixInfrastructure

Consistencyin Tax &

Trade Polices

Average FDI 2007 - 2011Country Rank US$ Billion China 3 86.8 India 18 20.4 Malaysia 34 6.8 Indonesia 38 6.6 Pakistan 51 2.9

Source:Economist Intelligence Unit

Attract FDI

Only ‘1’ economic indicator guarantees a nation’s long term success …

GDP GROWTH RATE

guarantees

GDP Growthhas significant

impact on “PER CAPITA”

& hence“STANDARD OF LIVING”

DID YOUKNOW

PAKISTAN’sGDP RECORD

60 - 70 70 -80 80 -90 90 - 00 00 -10 08 -10 -

1.0

2.0

3.0

4.0

5.0

6.0

7.0

6.8

4.8

6.9

4.0 4.6

3.2

GD

P G

row

th R

ate

(%

)

Gen.Ayub

60 - 69

Gen.Yahya70 – 72Bhutto73 – 77Gen,

Zia-ul-Haq78 - 79

Gen.Zia-ul-Haq

80 – 88Benazir88 - 89

Nawaz90 – 93Benazir93 – 96Nawaz97 – 98

Musharaf99

Gen.Musharaf

00 – 07Asif Zardari

08 - 99

Asif Zardari08 - 10

LET’SCOMPARE

WITH

GDP Growth (%) 60 - 70 70 -80 80 -90 90 - 00 00 -10 08 -10

China 3.0 7.4 9.8 10.0 10.3 9.7

India 6.7 2.9 5.7 5.6 7.4 7.9

Pakistan 6.8 4.8 6.9 4.0 4.6 3.2

LEGEND Above 7%5% to 7%Below 5%

+6.5%+4.7%

4

1

1

3

1

2

3

GDP GROWTH ROLLING AVERAGE50, 40, 30, 20, 10 Years

60 - 70 70 -80 80 -90 90 - 00 00 -10 08 -10

China 3.0 7.4 9.8 10.0 10.3 9.7

India 6.7 2.9 5.7 5.6 7.4 7.9

Pakistan 6.8 4.8 6.9 4.0 4.6 3.2

LEGEND5% to 7%Below 5%

1960 1970 1980 1990 2000 2008 2010 -

200

400

600

800

1,000

1,200

1,400

1,600

India Pakistan

1960 1970 1980 1990 2000 2008 2010 -

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

China Pakistan

Per CapitaCurrent $

Avg. 90 -10

China 10.1

India 6.5

Pakistan 4.3

Avg 60 - 89

China 6.7

India 5.1

Pakistan 6.2

-($500)-($3,400)-($3)

+$56

SEE impact ofGDP GROWTH RATE on PER CAPITA

vs. INDIA

vs. CHINA

vs. INDIAvs. CHINA

China 7.5 yrsIndia 9.1 yrsPakistan 22 yrs

Based on Current GDP Growth rates

they willdouble GDP in

x 7x 4x 2

GDP growth rate

POWEROF

PRIVATESECTOR

Based onCurrent GDPGrowth rates

200 Largest Global Companies are …

Largerput together (excluding the

top 12 countries)

… then all the WORLD economies

Total Revenue generated by TOP 500

Global Firms is …

$23 Trillion

… GLOBAL GDP is estimated

to be around $57 trillion.

POWEROF A

SINGLECOMPANY

Based on its revenue of $408 Billion, it will

be the ….

22nd

… largest ECONOMY in the

WORLD !!

Has global revenue of …

$204 B… which is larger than GDP

of countries like Pakistan,

Malaysia, Israel and Egypt !!

APPLE has more cash than the WORLD’S

largest sovereign government, i.e.

USAcash balance of $73.8 billion in

… $76.2 billions at the end of June vs.

US Treasury.

This is the IMMENSE POWER

of the Private Sector

IFProperly Channeled

DID YOU

KNOWTHIS ABOUT

PAKISTANPRIVATE SECTOR

Last company in Fortune 500: Dia Nippon Printing $17 Billion

Largest Pakistani Company: PSO $8.5 Billion

Large Indian Companies: Indian Oil $68.8 Billion (# 1)Reliance Ind. $58.9 Billion (# 3)

Reliance Industries alone is bigger then all Companies in PakistanTurkey’s largest company, Koc Holding is bigger then our top 30 Co’s

German company ‘Volkswagen’

Top 4 Indian companies together

THESE ARE LARGER THEN PAKISTAN’s GDP

9 largest companies in the world

Top 3 Mexican companies together

PRIVATE SECTORAND

INDIVIDUALCOMPANIES

CAN MAKE THE DIFFERENCE

OURECONOMY

OURCOUNTRY

But current status is DISMAL

0.2% of Global GDP0.3% of Global Trade118/144 in Country Competitive Index*PAKISTAN

SPEICAL

WHATMAKES

We have a greatNATION with rich

resources and potential to be

GREAT* Dropped 17 positions 2011 vs. 2009 World Economic Forum

World’s largest Copper Reserves

2nd Largest Coal Reserves

3rd Largest Cotton Producers

6th Largest in Wheat Production

6th Largest Population

10th Largest Work Force 3 Million workers entering

workforce every year

WHY?

TOANSWER WE

MUST ANALYZEGDP MAKE-UP

21.8%

23.6%

54.6%

Agriculture Industry Services

Industry + Services 78.2% of GDP

GDP Split by Sectors

PRIVATE & PUBLIC

SECTOR& PUBLIC

HOW IS OURINDUSTRY &

SERVICES SECTOR

PERFORMING

2 KEY QUESTIONS

a) How Developed is this sector

b) Is it Organized

a) How Developed is this sector

One way to check ifIndustry & Services Sector is Under-Developed is when:

Agricultural Sectorsplit of GDP is inDouble Digits

Double digit Split: 6 countries

> 15% = 3 Countries> 20% = Pakistan ONLY

World Largest 30 Economies – Agricultural Split

  Wor

ld

 Unit

ed S

tate

s

 Jap

an

 Ger

man

y

 Unit

ed K

ingdo

m

 Fra

nce

 Mex

ico

 Spa

in

 Indo

nesia

 Aus

tralia

 Iran

 Net

herla

nds

 Sau

di Ara

bia

 Sou

th A

frica

 Pak

istan

 Mala

ysia

0%

5%

10%

15%

20%

25%

1. India 2. Indonesia3. Iran 4. Thailand5. Egypt 6. Pakistan

1 2

3 4

5

6

For any economywith a Developed

Industry/Service Sectorthe

AGRICULTURE SPLIT

<10%

Current Services/Industry Developed

0

50

100

150

200

250

300

350

400

36 36

134

400

Agriculture Services & Industry

9%

To BeDEVELOPEDServices &

Industryhas to grow

3 times

Agriculture Split of GDP

22%

CONCLUSIONOUR

INDUSTRY & SERVICE SECTOR

is EXPREMELY

Under-Developed !

2 KEYQUESTIONS

a) How Developed is this sector

b) Is it Organizedb) Is it Organized

Pak Mal Sin

India C Br

S. -

20

40

60

80

100

120

140

160

180

22

173 166

93 81

74

107

* World Bank website

Market Capitalization of Listed Companies as % of GDP

Pakistan Organized Corporate Sector extremely Under-Developed

@ 22% it DWARFS

in comparison

Huge

Opportunity

Exists

2011

2006

2000

550 600 650 700 750 800

637

651

762

# of Listed Company

Karachi Stock Exchange (Guarantee) Ltd.

125LESS

Co’sin 10 years

* KSE Only

*

Switzerland

Netherland

Taiwan

Australia

China

India

Pakistan

0% 20% 40% 60% 80% 100% 120%

103%

102%

66%

24%

19%

18%

11%

Market Capitalizationof Top 8 Companies

(as % of GDP)MARKET CAPITALIZATION OF TOP 8 FIRMS

(as % of GDP)

SYMBOL COMPANY NAME MARKET CAP (Rs)

OGDC Oil & Gas Development 734,727,598,572 PPL Pakistan Petroleum 259,489,514,176 MCB MCB Bank Ltd. 173,739,531,529 HBL Habib Bank Ltd. 122,169,247,200 NESTLE Nestle Pakistan Ltd. 107,698,834,688 NBP National Bank Pak. 103,358,443,001 FFC Fauji Fert 85,399,409,730 UBL United Bank Limited 83,525,780,112 PTC P.T.C.L.A 73,291,080,000 POL Pak Oilfields 70,008,130,483 ENGRO Engro Corporation 63,518,664,557 ULEVER UniLever Pak 57,963,576,760 ABL Allied Bank Ltd. 54,864,373,505 PSO P. S. O. 50,629,155,528 HUBC Hub Power 43,289,146,104

SYMBOL COMPANY NAME MARKET CAP* (Rs)

KSE TOP 15 FIRMS BY MKT CAP

GOVERNMENT OWNED ENTITIESACCOUNT FOR 66% OF TOP 15 FIRMS

* Dec 2010

OrganizedSector is

veryUndeveloped

In Pakistan:

Un-Organizedis flourishing

&booming

Org

anized

Secto

r

Un

org

anized

Secto

r

Why ?1. Too Regulated ?2. High Taxation ?3. Difficult govt.

polices & procedures ?

4. Political will ?5. …..

Estimatedto be2 to 3 timesorganized

OrganizedSector is

veryUndeveloped

Un-Organizedis Flourishing

&Booming

Make Organized

SectorFully

Developed

Must break out ofCURRENT PARADIGM

GOAL

PRIVATE SECTOR

IS THE FIRE THAT WILL

DRIVE OUR ECONOMY

We need to address the 3 C’s:

1. What govt. policies will help drive ‘corporatization’ ?

2. What do we need to do to become ‘competitive’ ?

3. How to gain ‘confidence’ of businessmen & investors?

CORPORATIZATION

COMPETITIVE

CONFIDENCE

NOW YOU

KNOW

ONCEwe were

GREAT

WE HAD A PROGRESSIVE ECONOMIC OUTLOOKPakistan was called out amongst “THE NEXT 11” by

Goldman Sachs Research in 2005

WE CANSTILLBE

GREAT

WE MUST DRIVE DOUBLE DIGIT GDP

GROWTH FOR A FEW DECADES

1. Having a Clear Vision & Select Strategies2. Robust Corporate Governance Structure3. Conducive Government Polices4. Invest in Human Capital & Resources5. Simple & Easy Financing Available

PRIVATE SECTOR must focus on :

Disproportional Growth

Private Sector

CAN Drive

Unfortunately, time is running out!

WE MUST ACT NOW …

CAN BEBRIGHT

FUTURE

THANK YOU