Wednesday, April 7, 2010

Multinational Corporations and the Future of Pakistan


Pakistan is a third world state with a agricultural based economy. The nation which has nearly 190 million inhabitants is facing numerous issues and obstacles. Yet it is part of the group of emerging nations after BRIC with a potential for growth.


Pakistan economy outlook
The GDP growth rate in Pakistan is at levels that more developed nations such as the USA and Britain would be eager to have. The nation also enjoys a young population with over 505 of Pakistanis under the age of 25. The economy is growing and the per capita income has increased over the years along with the country’s foreign reserves.  The growth spurt has been somewhat decreased in the recent past due to the worsening situation and political uncertainty.

However an idea of the resilience and strength of the Pakistani economy can be gauged from the fact that the global financial crisis did not impact the nation till about a year or a year and a half after it broke.  The country’s growth is attracting major MNCs –those already in the market are gearing up and putting their money on Pakistan while new companies are eager to set up shop. The companies are ready to meet government requirements such as having an infrastructure of over 60,000 sq ft and face extra regulation especially in the pharma sector.

Recently it was reported that big companies such as Unilever and Nestle with a sizeable investment in Pakistan are hoping the country will be a source of growing profits. Figures suggest that NestlĂ© Pakistan  boosted sales by 29% in 2011This is in line with the Swiss brand owner has a target of deriving 45% of total revenues from the emerging world by 2020. Unilever Pakistan also enjoyed sales growth of 15% over the period of January to June 2011. Globally, the company has set a goal of increasing sales 100% by 2020, with most of the growth coming from outside the USA and Europe.

The fact that Pakistan has a largely untapped rural market is a great incentive for big MNCs. Local companies are hard pressed to compete with the incredible economies of scale that these mega corporations (what multinational corporations are called by some detractors) can bring to bear.

Issues of sovereignty and transfer pricing as well as the ability of the MNCs to put pressure on the government which sorely requires the advantages they bring will continue to cloud the issue. However it is clear to people who are realistic that the future of Pakistan depends on multinational corporations and the benefits they bring.