TERM PAPER Topic: - PEST analysis of Pakistan

Submitted by Mohd. Asif

ROLL NUMBER – AUD0637

BACHELOR OF BUSINESS ADMINISTRATION- 3C

AMITY UNIVERSITY DUBAI CAMPUS MARCH 2013

ACKNOWLEDGEMENTS

I wish to thank Mrs.Priyanka Chandanani for her advice and guidance. I appreciate their effort of providing necessary information regarding the paper & also for their support in completing the paper.

I would also like to express my gratitude towards my parents for their encouragement and support.

Lastly, I would like to extend my sincere thanks to all those at Amity University Dubai who have willingly helped me out with their abilities.

PEST Analysis of Pakistan

Political If we observe the political situation of Pakistan, much of the politics is based on different ethnic groups. It’s fair to say that the current political situation of Pakistan is in dire need of substantial changes if we compare it to the political systems of leading nations in the world.
Pakistan has a democratically elected government where the ruling party is Pakistan People’s Party.
Common perception is that it is a weak government, nevertheless backed by the western powers. It is not considered to be a stable government that could change anytime.
Law & Order and the corruption situation in the country are at its worst. However, the press is quite free where the industry as a whole has seen tremendous growth over the past few years.
Several key organizations, like PSO and PIA, are nationalized or partially nationalized. This is viewed as a positive approach because of the unstable political and economic situation in the country. Complete or partial ownership by the government serves as an insurance policy for the organization and its shareholders.
As mentioned earlier, a weak government can change at anytime, which may translate into a change at the top management of many, if not all of these government owned organizations.
Role of Political Parties in Pakistan
Almost every party represents a particular ethnic group, therefore no party has got the support in every region because the role of political parties in Pakistan is very much based upon different ethnic groups they represent. This is one of the major reasons of slow development in some specific areas as compared to others. There are a number key problems in political system of Pakistan, & the list grows on and on with every passing minute.

The current situation in Karachi and Baluchistan is worse than ever. The blame of these riots clearly is on politicians who are just manipulating different groups to get benefits for themselves. If the current political situation in Pakistan does not change, the country would keep on suffering at the hands of monarchs and waderas! The role of youth in politics seems to be missing in this scenario and needs to be looked upon if the country is to strive for betterment. One possible solution for the underlying problem is to improve the problems of education system that erodes as every day falls behind.
Political:
Prior to the worldwide recession, Pakistan was considered an attractive region for investment owing to a liberal investment policy. However, in present times the situation has completely changed, with the country losing its high investment value for both domestic and international investors. One of the main reasons behind this issue is political instability. A weak government, inefficient political parties and instable political culture, amalgamate to create the basis for a politically instable state.
Similarly, in Pakistan, there is deteriorating law and order situation and terrorism is on a rise since the 9/11. Terrorism is causing huge losses to the industrialized and trading sectors. The rising political obstacles in the country are having a negative impact on the economy and stock business. President Asif Ali Zardari is criticized from opposition parties after the Supreme Court struck down a reprieve that had protected the increasingly unpopular leader and several of his political allies from corruption charges. The ambiguity regarding corruption cases against some ministers, advisors and members of parliament has created uncertainty among the businessmen. Due to the IMF demand, the government decided to increase the power tariff which has led to unstable deliveries to foreign buyers and investors by our export oriented industries. The loss of export orders has now become common and large numbers of importers have shifted to other regional countries. The MNC’s prefer to invest in a location that is politically stable but in Pakistan due to strikes, riots, suicide bombings etc the risk of investment has increased. Therefore investors are finding their safety nets in countries such as India and China. Also due to the political structure in the country, the tax exemption provided to the elite section of the society is unfair and needs to be reduced.

One of Pakistan's most controversial political figures, Asif Ali Zardari is often considered something of an accidental president. He came to power in September 2008 on a wave of public sympathy following the assassination of his wife, former Prime Minister Benazir Bhutto. But his term in office has been one of unrelenting political and social turmoil, growing instability and persistent allegations of corruption and economic mismanagement.
His leadership has seen a marked deterioration in Pakistan's relationship with Washington, with the US questioning whether Islamabad is doing enough to tackle militancy.
As military chief, Gen Kayani has presided over one of the most turbulent periods in Pakistan's military history, with the killing of Osama Bin Laden by US forces, the growing threat of terror attacks and widespread public anger at drone strikes which have resulted in the deaths of civilians as well as militants.
In January 2013 he was publicly criticised by a leader of the minority Shia community for what he said was the army's failure to protect them from a series of sectarian attacks that killed almost 100 people.
The former international cricketer has been on the political scene for several years, leading his Pakistan Tehreek-e-Insaf (Movement for Justice) party, but has struggled to make any significant gains. He has tried to bolster his popularity by riding a wave of disillusionment, particularly among the urban middle class.
Mr Khan has succeeded in winning the support of some politicians who have grown disgruntled with their own parties - they could help counter accusations of political inexperience.
In October 2012 he led a thousands-strong motorcade rally against US drone strikes in Pakistan, but its impact was neutered when he was stopped from entering the restive tribal regions. He has also held a series of well-attended rallies over the last two years.
Mr Khan has pledged to sweep away the rampant corruption plaguing Pakistani politics, in part by calling for an end to foreign aid. But correspondents say he has some way to go to turn popular support into electoral gains. He is, however, believed to be popular with the military.

Economic
The economy of Pakistan is the 27th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP. Pakistan has a semi-industrialized economy,[13][14][15] which mainly encompasses textiles, chemicals, food processing, agriculture and other industries. Growth poles of Pakistan's economy are situated along the Indus River;[15][16] diversified economies of Karachi and Punjab's urban centers coexist with lesser developed areas in other parts of the country.[15] The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit – driven by a widening trade gap as import growth outstrips export expansion – could draw down reserves and dampen GDP growth in the medium term.
Pakistan’s economic freedom score is 55.1, making its economy the 121st freest in the 2013 Index. Its score is 0.4 point higher this year, with modest gains in half of the economic freedoms, including the control of government spending and business freedom. Pakistan is ranked 24th out of 41 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.
Pakistan continues to lag significantly behind other countries in the region in advancing reform. Lingering social and political instabilities undercut meaningful progress in installing a stable macroeconomic environment, and the institutional capacity to uphold the foundations of economic freedom has deteriorated. Property rights are severely undermined by a weak and ineffective judiciary susceptible to political interference. Corruption, endemic throughout the economy, remains a serious drag on long-term economic development.
The overall regulatory environment continues to be affected by convoluted administrative bureaucracy, and there is little commitment to opening markets. Tariff and non-tariff barriers, coupled with burdensome and non-transparent investment regulations, hamper development of a dynamic private sector and modernization of the economic base.

BACKGROUND
Pakistan, the world’s second-largest Muslim-majority country, is plagued by political instability and violence. Civilian and military leaders continuously jockey for power, and the nation is beset by terrorism and a well-organized insurgency along the border with Afghanistan. Devastating floods in July 2010 dislocated millions of people and caused billions of dollars in damages. The May 2011 U.S. raid that killed Osama bin Laden and a November NATO air strike that accidentally killed 24 Pakistani soldiers along the Afghan border sparked a crisis in U.S.–Pakistan relations. Pakistan has privatized some state-run industries, but the economy is still heavily regulated, and the highly volatile security situation discourages foreign investment. Other problems include rising energy shortages and food prices.

RULE OF LAWVIEW METHODOLOGY
The rule of law is unstable across the country. The independence of the legal system is poorly institutionalized, and judicial procedures tend to be protracted, costly, and subject to political pressure. Property rights are not protected effectively. Pervasive corruption persists. Swiss authorities are investigating allegations that the current president accepted kickbacks from Swiss firms in the 1990s.
LIMITED GOVERNMENTVIEW METHODOLOGY
The top income tax rate is 25 percent, and the top corporate tax rate is 35 percent. Other taxes include a general sales tax (GST) and an interest tax. The overall tax burden equals 10.1 percent of total domestic income. Government spending is equivalent to 19.1 percent of GDP. The deficit remains over 5 percent of GDP, and public debt is about 60 percent of GDP. The fiscal account is unsteady, and Pakistan’s relationship with the IMF has been strained.

REGULATORY EFFICIENCYVIEW METHODOLOGY
Progress in improving the entrepreneurial environment has been modest. Starting a business takes an average of 21 days, although no minimum capital is required. Completing licensing requirements still costs over twice the level of average annual income. The labor market remains stagnant. A large portion of the workforce is underemployed in the informal sector. Inflation is still high but has moderated somewhat. Monetary stability is weak.
OPEN MARKETSVIEW METHODOLOGY
The trade-weighted average tariff rate is very high at 9.5 percent, and complex non-tariff barriers further constrain trade freedom. The investment regime remains inefficient. Foreign direct investment has been declining, discouraged by political instability, sectarian conflict, and heavy bureaucracy. A majority of commercial banks are private, but the banking sector remains vulnerable to state interference. Capital markets are underdeveloped.
Pakistan GDP growth in fiscal year of 2008 has been estimated to be 5.8 percent. It can be assumed as a result of in depth economic analysis at Pakistan that due to internal conflicts and political disputes, economy of Pakistan has always been impoverished and underdeveloped.
In fiscal year 2008, gross domestic product of Pakistan with regards to purchasing power parity was estimated to be $454.2 billion. Pakistani GDP for official exchange rate was approximately $160.9 billion. Real growth rate in 2008 GDP of Pakistan, as per statistical data was found to be 4.7 percent, while $2,600 was GDP per capita income.
Economic analysis of Pakistan shows that each sector contributes differently to Pakistan economy. Agricultural sector contributes about 20.4 percent to Pakistan gross domestic product. 26.6 percent is contributed by industrial sector as was estimated by 2008 GDP of Pakistan. 53 percent was received from services sector during 2008.
Privatization of banking sector assisted by foreign assistance made Pakistan get access to global markets. This was suggested by IMF. There has been a macroeconomic recovery since then in Pakistan. Between 2004 and 2007, there has been a growth of 6-8 percent. As per in depth Pakistan economic analysis this growth was accelerated by industrial and service sectors. Since 2001, level of poverty has decreased by 10 percent and a steady development can be seen in Islamabad. There has been a 52 percent real increase in budget share. n the last three years, the Government of Pakistan has brought about macroeconomic stability and has implemented wide-ranging structural reform to spur economic growth. Perhaps the most important example of restructuring is the devolution initiative which, when successfully implemented, holds promise for improved access to critical public services for the poor. In addition the poverty reduction strategy prepared by the country highlights needed improvements in education, health and water sectors. Further the Government took two major initiatives - Khushal Pakistan (a comprehensive poverty intervention) and Khushali Bank (a microcredit bank) - as nationwide efforts to address poverty and vulnerability.
This report is a detailed examination of poverty trends and their underlying causes. The analysis covers the 1990s, documenting the underlying causes of the deficiencies in the social agenda. In doing so, it highlights the critical priorities for poverty reduction that the ongoing reform program will need to incorporate.
The Government of Pakistan faces challenges and opportunities unprecedented in its history. The level of poverty in the country has not appreciably changed in the ten years preceding 1999, despite having fallen in the previous ten. The educated and well off urban population lives not so very differently from their counterparts in other countries of similar income range, or even of their counterparts in Western countries. However, the poor and rural inhabitants of Pakistan are being left behind. This is shown by many social indicators in ways that, unless sharply improved will leave Pakistan falling further below other countries' performance in the future.
Largely based on data collected by Pakistani agencies and institutes', the report analyzes the social gaps and fissures that are becoming ever more pronounced. It identifies constraints that impede economic and social progress and suggests policies for the future.
One third of the population can be classified as poor in 1999, and somewhat more in rural areas. The country's education and health indicators are depressed when compared to other countries of similar per capita income or rate of growth, and reveal large regional, urban/rural, and gender disparities.
The differences between urban and rural education and health indicators are closely associated with the high incidence of poverty in the 1990s. The raising and narrowing of health and education differences, this report argues, is the way the government can move towards its goal of poverty reduction and macroeconomic growth. Social Health and Education sectors are the two most important sectors for any country, specially a developing nation. It is the government’s responsibility to provide the best possible health care and educational facilities for its people. Unfortunately, these are the two areas where the government allocates the least amount in their annual budget.
All retail outlets across the country dispense environmental efficient fuels at no additional cost to customers. These fuels play a vital role in reduction of exhaust emissions that result in less pollution and greener environment.
PSO has implemented a health, safety and environmental management system and related standards to carry out operations and activities in a manner that is protective of human health and the environment. This environmental management system at PSO is designed to make health, safety and environmental care an integral part of all company projects and a responsibility of all employees.
There are fifteen (15) Mobile Quality Testing Units in operation which ensure consistent quality of products being supplied to consumers.
Recently, PSO adopted water tool developed by World Business Council for Social Development (WBCSD) to optimize the use of water resources by PSO.
Initiation of the first daycare center in a state owned organization to facilitate employees with better management of their work and family.

Pakistan's estimated population in 2011 is over 187 million making it the world's sixth most-populous country, behind Brazil and ahead of Nigeria. During 1950–2011, Pakistan's urban population expanded over sevenfold, while the total population increased by over fourfold. In the past, the country's population had a relatively high growth rate that has been changed by moderate birth rates. The population growth rate now stands at 1.6%.

Dramatic social changes have led to rapid urbanization and the emergence of megacities. During 1990–2003, Pakistan sustained its historical lead as the second most urbanized nation in South Asia with city dwellers making up 36% of its population. Furthermore, 50% of Pakistanis now reside in towns of 5,000 people or more.
Pakistan has a multicultural and multi-ethnic society and hosts one of the largest refugee populations in the world as well as a young population.
In growing years, incidences of suicide issue to rest assured wider in Pakistan and suicide has turn into a major public health problem. From available evidence it appears that most suicides occur in puerile people (contrasting men and married female) beneath the age of 30-second childhood. Hanging, use of insecticides and firearms are the vastly common methods and interpersonal proportion problems also gregarious issues again are the most common ring in for suicide. Mental illness is one of the reasons of the suicide attempts, there are several other reasons dilatory it, mind lack of resources, and lacks of primary health services, political instability are also reasons of suicide attempts. To tackle this problem public also health professional’s ardor to power altogether cloak oversight besides non-government institutions.

Suicide and attempted suicide are understudied subjects in Pakistan, an Islamic country where they are considered criminal offenses. at rest suicide statistics are not compiled nor are suicide mortality statistics reported to the totality Health job (WHO). There is absence of information on suicide from Pakistan, an Islamic kingdom in which data collection poses formidable challenges. A variety of social, legal, and religious factors establish reporting and diagnosing suicide ambitious. Paradoxically, incidents of suicide are regularly reported in newspapers Pakistan. In the effortlessness of other item these reports puff a useful, though basic enlightenment source as suicidal deaths

Pakistan is a South Asian developing country with a population of approximately 162 million, with 97% Muslim folk. Suicide is a condemned act in Islam. Traditionally, suicide numbers were low but in recent years, they have shown an increase and suicide has become a major public health no picnic clout Pakistan. There are no certified statistics on suicide from Pakistan. Suicide deaths are not included in the national annual Mortality statistics. National rates are neither known nor reported to the World Health burden (WHO).

Pakistan as a nation is a developing country and consequently she faces a wide array of social problems: educational, economical, political, religious and a number of internal ethnic conflicts. However I believe that it is more important to address small issues first and then work towards the annihilation of the larger ones. After all small steps lead to big changes and transformations. Child Labour is a social issue within Pakistan and is considered a violation of human rights by the United Nations. Pakistani society is such that, a poor child can quite conveniently be deprived of basic education, only to feed the rest of his family members. Anyone up to the age of 18 is a child and his basic right is to receive education and proper upbringing rather than use his hands to destroy his own bright future. Children are especially exploited in the third world countries as they are a cheap source of labour and Pakistan children are used as labourers in the Sports Industry, Carpet Industry and the Footwear and in glassware production. According to the Federal Bureau of Statistics of Pakistan, 3.3 million out of 40 million children are working in various industries, although child labour is strictly prohibited by law. Child Labour is a serious social problem within Pakistan because the future and progress of any country depends on an educated and enlightened youth and if a child is not properly socialized then he/she will not be able to grow as confident and literate Pakistani citizens. There are various reasons for exploitation of children within the economic sector of Pakistan and such causes are directly related to the major social problems of Pakistan. Sociological Variables as the Causes of Child Labour in Pakistan: The factors that generate child labour within Pakistan are parental poverty and illiteracy; an irresponsible political system; social and economic pressures; lack of education. Social attitudes in Pakistan due to which a child is considered an adult at quiet an early stage due to biological changes, also are a cause of exploitation of children below 18 years. Poverty is a major social issue within Pakistan and as a result children are made to work in various industries in order to support their financially poor parents. The status of the family directly influences the choices available to a child and obviously if a family is extremely poor with comparatively less resources then consequently, each member, be it a child or an adult will be required to work and bring in money in order to survive. The economic and family status in the rural areas of Pakistan id quite low and as a result children are forced to work in various manufacturing and tertiary industries and are also over-exploited.61.2 % of Pakistan is illiterate and poor education resulting in limited exposure to human rights is a major cause of child labour.

Education is a sociological variable and is of extreme importance because it emancipates a person from the grip of ignorance. However most people in the rural areas have no access to educational institutions and thus a child learns the tricks of trade from his father and instead of gaining education he chooses to work as a labourer or is at times forced by parents’ due to their own lack of basic knowledge. Pakistan does not have sound educational system under which a child can be adequately socialized into becoming a productive member of society. Education is not treated as a priority and inevitably child exploitation continues within our nation. Girls and boys are forced to work as domestic servants in the homes of the upper middle class or the richer elite. Thus class divisions become more prominent with the exploitation of the poor by the rich and this leads to an inequitable distribution of wealth and income. Pakistan is going through a serious social stratification problem and the rich continuesto get richer whereas the poor continues to get poorer. Girls are exploited within the rich households, are paid less and are often physically harassed by the male owners. This leads to further sex and gender related issues and thus child labour needs to be strongly curtailed. Pakistan needs a strong government and political structure to address the issue of child labour. However President Musharraf’s government is a military dictatorship which considers a nuclear programme a priority but banning child labour is not a serious issue for them. There are loopholes in the political structure of Pakistan and a weak government is a main cause of the denial of rights of the citizens of a country. Therefore children’s rights are largely ignored and deliberately avoided. For a positive change a democracy is needed which will fight against child labour through reformative action and laws and regulations. In Pakistan 7% of children working suffer from health problems and are physically abused as well by their owners. These are all structural problems within the social agencies of Pakistan which not only accelerate the rate of child labour but also set a precedent for other developing nations to follow.

Technological

Technological expertise is readily available in the country with overflow of IT professionals in different industries.
There has been an immense technological improvement in the industrial sector and petrol and oil industry is no exception.
Industrialization in the country is fairly stagnant with international investors quite wary of entering this risky Pakistani market. Therefore, latest manufacturing technology is significantly missing from the market. As a result, the countries imports are higher than its exports. And the main exports are from the agricultural sector and the textile industry.
A report in the California-based publication, Commerce Times, earlier this month said that irnoically, “the biggest boost” to Pakistan’s efforts to break into the global IT marketplace came on 28 September when India announced an income tax of more than 36 percent on foreign firms involved in software, R&D and customer service operations in India. The steep tax proposal had been in the works since the beginning of the year and now that it has been made law, it is expected to prompt US firms to follow General Electric’s lead in selling off assets in India, the journal said.
Meanwhile, Mushtaq Malik, economic minister at the Embassy of Pakistan, strongly denied a US-based report carried by Daily Times last week that because of US security concerns, American companies doing business in Pakistan were running into serious difficulties when making remittances to Pakistan. The report said that the United States appeared to be treating Pakistani like Cuba. The Pakistan embassy official told this correspondent on Friday, “I do not know of a single case where this has happened. Apart from keeping in touch with both the offiicial and the corporate sector, I can claim to be well-informed about the operations of our financial institutions, such as banks, and I have yet to hear our bankers complain about the kind of roadblocks the report in question mentioned. If any such difficulties are experieneced in the future, we will see to it that they are removed as our two governments would not like anything to stand in the way of good bilateral trade and commerical relaitons.”
Pakistan is the “hot new offshore information technology (IT) destination” because of a combination of favourable economic circumstances. “Just when many Western managers are finally becoming comfortable with the idea of working closely with Indian IT firms, along comes Pakistan. Pakistan is shaking off decades of ‘also ran’ status. Funds invested into building educational institutions in Pakistan (when there were not enough jobs to absorb all the graduates from those institutions) are paying off as Pakistan begins to field a modern, highly productive labour force that is the envy of more prosperous but less tech savvy nations elsewhere in the region,” Commerce Times reported.
IN EARLY 2009, PTA felt that Pakistan was ready for 3G technology to penetrate the market. With teledensity up to 63%, over 100 million mobile users, the telecom sector already contributing 3% to the economy’s GD

P and a frequent talk of a rollout of the 3G services, PTA announced in August 2009 that the services will be rolled out very soon.
Since then we have had numerous seminars organized by PTA, themed upon 3G technologies and its importance for Pakistan. Even Qualcomm, a leadin
US technology firm, was invited to participate and express its interest in the Pakistani telecom industry. The most recent seminar wrapped up with the PTA chairman stating “…..by the end of this quarter they would be able to roll out plans for 3G services once the policy is approved by the government”, a tune that has been played to the industry for two years, now. I ask, what is the delay?
For last two year, government is saying that they are very serious about launching 3G in Pakistan, but yet the only thing came out of such seminars are only and only statements and false promises of a launch. People are already using 3G enabled handsets, without the services being available.

REFERNCES

http://youthexperia.blogspot.dk/2012/11/PoliticalSituationOfPakistan.html http://www.ukessays.com/essays/economics/pest-analysis-of-pakistan-economics-essay.php http://www.bbc.co.uk/news/world-asia-16526936 http://en.wikipedia.org/wiki/Economy_of_Pakistan http://www.heritage.org/index/country/pakistan http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20209057~menuPK:435735~pagePK:148956~piPK:216618~theSitePK:430367~isCURL:Y~isCURL:Y,00.html http://www.bisp.gov.pk/charts/FinalPaper/SocialProtection%20in%20Pakistan%20A%20Profile%20of%20Existing%20Programmes%20and%20an%20Assessment%20of%20Data%20Available%20for%20Analysis.pdf http://www.sciencedirect.com/science/article/pii/S2212017312000527 http://www.pide.org.pk http://www.shvoong.com/social-sciences/sociology/496892-social-issue-pakistan/ http://www.panishani.com/2012/12/pakistan-population-growth-rate/