Financing to SupportMAKE IN PAKISTAN

THE PBC’S MEMBER COMPANIES

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 02

THE PBC’S MEMBER COMPANIES

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 03

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 04

“MAKE IN PAKISTAN”

HIGHER TAXES FROM ABROADER BASE

JOBS IN MANUFACTURING& SERVICES

VALUE-ADDED EXPORTSAND IMPORT SUBSTITUTION

Pakistan’s three acute needs, one solution:

Strong domestic industry with a consumer base of 207 mn

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 05

Since ’88, Pakistan has been to IMF 12 times.

9

8

7

6

5

4

3

2

1

01993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1.7

3.2

1.9

0.91.36 1.36

1.91.7

3.6

7

8.1

5.2

4.1 3.9 4.4

2

4.14.7

1.7

3.13.2

4.5 4.5

33.1

Imp

or

t C

ov

er

in M

on

ths

RECURRENT EXTERNAL ACCOUNT CRISES

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 06

1.4

1.2

1

0.8

0.6

0.4

0.2

0

%

Pakistan Bangladesh Vietnam

2003

0.12

0.75

Growth Multiple

Growth Multiple

>x2

Growth Multiple

>x7

0.160.09

0.170.2

1.21

Pakistan's Share in World Exports

2017

Pakistan’s Share of World Exports Down, Bangladesh’s More than Doubledsince 2003 & Vietnam’s grew 7 - fold

PAKISTAN LOSING SHARE OF WORLD EXPORTS

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 07

Manufacturing (% of GDP)

20

18

16

14

12

10

8

6

%

2005 2007 2009 2011 2013 2015 2017

17.5

13.312.7

13.8 13.6

12.812 12.1

2018

Manufactured Goods as % of Exports

120

100

80

60

40

20

0

%

Pakistan Bangladesh

96

77

PAKISTAN IS DE-INDUSTRIALISING PREMATURELY AND MANUFACTURED GOODS ARE LOW IN EXPORTS

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 08

MANUFACTURING GROWTH LAGS NEIGHBOURS

Growth of Manufacturing

14

12

10

8

6

4

2

0

%

3.9

98

3.7

10.5

5.25.8

11.7

7.46.2

1111.8

2015 2016 2017 2018

Pakistan Bangladesh India

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 09

Disproportionate Tax on Manufacturing

Manufacturing

Agriculture

Retail & Wholesale

Rest

13.5

19.5

18.5

48.5

58

<1

1

40

Sector % of Tax Burden% of GDP

MANUFACTURING IS OVERTAXED

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 10

Poorly Negotiated FTA's

$94 Mn

($3.2) Bn

($1.5) Bn

($1.1) Bn

$38.7 Mn

Country Trade Balance (in year signed)

Year Signed

Sri Lanka

China

Malaysia

Indonesia

Mauritius

Trade Balance (in 2017)

2005

2006

2008

2013

2007

$268 Mn

($16.4) Bn

($1.0) Bn

($2.2) Bn

$2.2 Mn

FTA'S HAVE NOT HELPED TO BALANCE TRADE

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 11

112

170

74

169

49

42

Items Import Value 2017 (US$ Mn)

Import Value 2007 (US$ Mn)

Footwear

Pumps

Glassware

Tiles

Blankets

Fans

Growth Multiple

34

47

13

50

17

13

3.3x

3.6x

5.7x

3.4x

2.9x

3.2x

% Import from China

89

64

85

65

97

87

GROWTH IN IMPORT RELIANCE - MAINLY FROM CHINA

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 12

*World Bank Ease of Doing Business 2019 Ranking

47

13

3

Number of TaxesWB EDB* Paying Taxes Rank (out of 190)

Pakistan

India

Hong Kong(Best in World)

173

121

1

COMPLEX FISCAL REGIME

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 13

* Includes WWF/WPFF/Super Tax

17%

7%

12%

15%

10%

Country VAT/GST%Corp Tax %

Pakistan

India

Bangladesh

Srilanka

Vietnam

38%*

25%

15%

25%

22%

HIGH TAX RATES

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 14

Private Consumption % of GDP

100

80

60

40

20

01991 2001 2011 2016

64.4 68.2

76.2

81.2 80.1

59.4

55.9

61.8

Pakistan India

CONSUMPTION DRIVES THE ECONOMY …….. AND FDI

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 15

Investment to GDP Ratio

16.4

31 31

37

Pakistan Bangladesh India Sri Lanka

40

35

30

25

20

15

10

5

0

%

INVESTMENT IS HALF THAT OF OUR PEERS

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 16

9.6

6.6 6.0

3.6 3.3

9.48.2

5.7

3.85.0

3.13.9

5.4

7.7

10.4

13.612.5

20

18

16

14

12

10

8

6

4

2

0

%

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

16.3

19.4

Source: State bank of Pakistan and Pakistan Bureau of Statistics

GOVERNMENT CROWDING OUT THE PRIVATE SECTOR FROM BORROWING

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 17

17.6917.01

16.18

11.7510.28

9.348.11

6.59 6.30 6.07 5.976.73

20

16

12

8

4

0Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

%

LOW SHARE OF SME FINANCING IN TOTAL

F I N A N C I N G T O S U P P O R T M A K E I N P A K I S T A N 18

137

118

110

101

76

68

64

63

59

52

49

48

46

43

42

40

36

36

31

28

22

16

China

Malaysia

Thailand

Vietnam Chile

S.Africa

Brazil

Turkey

Nepal

India

Russia

Oman

Cambodia

Bangladesh

S.Arabia

Colombia

Philippines

Sri Lanka

Indonesia

Egypt

Mexico

0 50 100 150

Pakistan's Relative Standing in Credit - to - GDP Ratio (2010 - 17 Average)

PRIVATE SECTOR LENDING AS % OF GDP LOWEST

Pakistan

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