Financing to Support MAKE IN PAKISTAN F I N A N C I N G T O S U P - - PowerPoint PPT Presentation

Financing to Support MAKE 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 PA K I S TA N

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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 PA K I S TA N

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

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“MAKE IN PAKISTAN”

HIGHER TAXES FROM A BROADER BASE JOBS IN MANUFACTURING & SERVICES VALUE-ADDED EXPORTS AND 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

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

9 8 7 6 5 4 3 2 1 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017

1.7 3.2 1.9 0.9 1.36 1.36 1.9 1.7 3.6 7 8.1 5.2 4.1 3.9 4.4 2 4.1 4.7 1.7 3.1 3.2 4.5 4.5 3 3.1

I m p o r I m p o r t C o v e r i n M o n t h s t C o v e r i n M o n t h s

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 PA K I S TA N

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1.4 1.2 1 0.8 0.6 0.4 0.2 %

Pakistan Pakistan Bangladesh angladesh Vietnam Vietnam

2003

0.12

0.75

Growth Multiple Growth Multiple

>x2

Growth Multiple

>x7

0.16 0.09 0.17 0.2 1.21

Pakistan's Share in World Exports

2017

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

PAKISTAN LOSING SHARE OF WORLD EXPORTS

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Manufacturing (% of GDP)

20 20 18 18 16 16 14 14 12 12 10 10 8 6 %

2005 2005 2007 2007 2009 2009 2011 2011 2013 2013 2015 2015 2017 2017 17.5 13.3 12.7 13.8 13.6 12.8 12 12.1 2018 2018

Manufactured Goods as % of Exports

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

Pakistan Pakistan Bangladesh Bangladesh 96 77

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

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MANUFACTURING GROWTH LAGS NEIGHBOURS

Growth of Manufacturing

14 14 12 12 10 10 8 6 4 2

%

3.9 9 8 3.7 10.5 5.2 5.8 11.7 7.4 6.2 11 11.8

2015 2015 2016 2016 2017 2017 2018 2018

Pakistan Pakistan Bangladesh Bangladesh India India

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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

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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

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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

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*World Bank Ease of Doing Business 2019 Ranking World Bank Ease of Doing Business 2019 Ranking

47 13 3

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

Pakistan India Hong Kong (Best in World) 173 121 1

COMPLEX FISCAL REGIME

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* Includes WWF/WPFF/Super Tax 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

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Private Consumption % of GDP

100 100 80 80 60 60 40 40 20 20

1991 1991 2001 2001 2011 2011 2016 2016 64.4 68.2 76.2 81.2 80.1 59.4 55.9 61.8

Pakistan Pakistan India India

CONSUMPTION DRIVES THE ECONOMY …….. AND FDI

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Investment to GDP Ratio

16.4 31 31 37 Pakistan Pakistan Bangladesh Bangladesh India India Sri Lanka Sri Lanka

40 40 35 35 30 30 25 25 20 20 15 15 10 10 5

%

INVESTMENT IS HALF THAT OF OUR PEERS

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9.6 6.6 6.0 3.6 3.3 9.4 8.2 5.7 3.8 5.0 3.1 3.9 5.4 7.7 10.4 13.6 12.5

20 20 18 18 16 16 14 14 12 12 10 10 8 6 4 2

%

FY98 FY98 FY99 FY99 FY00 FY00 FY01 FY01 FY02 FY02 FY03 FY03 FY04 FY04 FY05 FY05 FY06 FY06 FY07 FY07 FY08 FY08 FY09 FY09 FY10 FY10 FY11 FY11 FY12 FY12 FY13 FY13 FY14 FY14 FY15 FY15 FY16 FY16 16.3 19.4

Source: State bank of Pakistan and Pakistan Bureau of Statistics Source: State bank of Pakistan and Pakistan Bureau of Statistics

GOVERNMENT CROWDING OUT THE PRIVATE SECTOR FROM BORROWING

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17.69 17.01 16.18 11.75 10.28 9.34 8.11 6.59 6.30 6.07 5.97 6.73

20 20 16 16 12 12 8 4

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

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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

50 50 100 100 150 150

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

PRIVATE SECTOR LENDING AS % OF GDP LOWEST

Pakistan

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