Pakistan: A Rising Star among Top Frontier Markets
By Riaz Haq
CA
After a recent survey by Japan External Trade Organization (JETRO) that shows Pakistan as top growth market for Japanese multi-nationals comes another encouraging report in the Wall Street Journal.
Here's an excerpt from a Wall Street Journal story on Pakistan:
The corporate world’s fascination with Africa shows through clearly in the rates of change of sentiment, too. The data compare an average of corporate sentiment for year-to-date 2014 with an average of the results over the full-year 2013.
Four of the five countries with the highest positive change in sentiment are in sub-Saharan Africa, as well as seven of the top 10.
Pakistan, though, is ahead of the pack in terms of the number of companies newly taking an interest in it. Sentiment toward the South Asian nation of 183 million people improved by 5.6 percentage points, putting it ahead of Africa’s rising stars Nigeria and Kenya, which each saw sentiment improve by just over four percentage points.
In absolute terms, though, Nigeria is still the clear leader among the three with twice the number of companies in the index considering investing there. Nearly three in 10 companies have Nigeria on their watch list.
By contrast, Pakistan’s South Asian neighbors Bangladesh and Sri Lanka appear to be losing their appeal, with each seeing the number of companies focused on them slashed by more than half.
Myanmar, which has only recently emerged as a potential destination for investment, saw a similar decline in corporate interest, with a meager 4% of companies including it in their watch list. Companies’ waning interest in Myanmar most likely reflects the realization among executives that the country is far from ready to receive significant foreign investment in most sectors.
Not surprisingly, the country that saw the greatest decline in attention from multinationals was Ukraine, whose 12.5-point decline was almost double that of the next-worst performer, Oman. While financial investors have seen healthy returns from their high-risk bets on the tumultuous central European economy, businesses are looking elsewhere for long-term opportunities.
Overall, sentiment toward frontier markets among the 200 or so multinationals included in the survey declined. All but 14 of the 70 countries covered in the survey have seen the level of corporate interest in them subside since last year.
Mr. Lasov believes the slide is less about the fundamental appeal of newly emerging markets and more about the revived interest in the developed world. “In the past few years, there has been a rebound in developed markets, which has attracted companies’ attention,” he says. “At the same time, companies have looked at the frontier markets and realized that many of them have tiny populations, so to build a business or manage a business in these smaller markets may not be worth the time.
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