History of Pakistan's Business and Industry
By Riaz Haq
CA
Pakistan's $1.1 trillion GDP ranks the country as the world's 24th largest economy in terms of purchasing power parity (PPP). Pakistan has come a long way since independence in 1947 when it was a poor agrarian country struggling to survive. Business and industry sectors now account for more than half of Pakistan's economy while agriculture's contribution is down to 20% of GDP.
The story of the country's business and industry parallels the ups and downs in its national history. It is the story of business individuals and families dealing with uncertainties. It is also the story of how the captains of business and industry were impacted by major events in the nation's history, particularly the breakup of Pakistan and the creation of Bangladesh in 1971. It is the story of survival in the midst of political instability, policy discontinuities and the fight against terror in recent years. It is the story of how the businesses and industries thrived under pro-business rulers and suffered under anti-business governments. It is the story of how the country's economy has performed under pro- and anti-business policies.
Captains of Industry
The United States had Rockefellers, JP Morgans, Carnegies, Fords and others who built American business and industry. Japan has Hitachi, Honda, Mitsubishi and other big names credited with building its business and industry. South Korea is home to recognized global giants like Samsung, Hyundai and others. A handful of individuals and families, aided by their governments, have played outsized roles in industrialization and economic growth in most major economies.
The captains of business and industry in neighboring India are also a few known large families including Ambanis, Birlas, Hindujas, Jindals, Mittals, Tatas, and a few others. They have contributed to economic growth in their country.
Pakistan had the so-called 22 families which began the process of industrialization in the 1960s but were devastated by the 1971 war. What was left of their business and industry was nationalized by the PPP government led by Zulfikar Ali Bhutto in the 1970s. Many of these families have since recovered and rebuilt and several new ones have now emerged. Their continued growth and Pakistan's economic progress depend largely on the continuity of business-friendly government policies in future.
Business and Industry in Pakistan
Here are the top 11 publicly traded groups of companies listed on Karachi Stock Exchange. These groups make up a little over one-third of the total market capitalization of all the companies listed on the Karachi Stock Exchange. The market caps here represent a snapshot and vary daily with stock trading: 1. The IGI Group tops the KSE listed groups. Headed by Syed Babar Ali, it is a diversified conglomerate that includes IGI insurance, IGI Life, Packages Ltd and other businesses with a combined market cap of Rs. 677 billion making up 7.4% of KSE.
2. Dawood Group includes companies such as Engro Corp, Engro Fertilizers, Engro Polymer, Engro PowerGen, Dawood Hercules, and Dawood Lawrencepur with a total combined market cap at Rs 442 billion adding up to 4.8% of KSE.
3. Pakistanimilitary's Fauji Foundation owns Fauji Fertilizer, Fauji Foods, Fauji Cement, Askari Bank, and Mari Petroleum. The Fauji Foundation Group has a total market cap of Rs432 billion, and a total KSE share of 4.6%.
4. Mian Mansha’s Mansha Group includes MCB Bank, DG Khan Cement, Nishat Mills Adamjee Insurance, Nishat Chunian, Lalpir Power, and Nishat Power. Ithas total market cap of Rs. 408 billion, or 4.4% of KSE.
5. Habib Group includes Indus Motor Company, Thal Limited, Habib Insurance, Habib Sugar Mills, Bank Al-Habib, Habib Metro, and Shabbir Tiles. Total market cap for the group is Rs326 billion making up 3.6% of KSE. 6. Bestway Group includes United Bank Limited (UBL) and Bestway Cement with total market cap of Rs. 310 billion, or 3.4% of KSE market cap.
7. Tabba Group has total market cap of Rs. 298 billion or 3.3% of KSE. The group includes Lucky Cement, ICI Pakistan and Gadoon Textiles.
8. The Atlas Group which includes companies such as Honda Atlas Cars, Atlas Honda, Atlas Battery, and Atlas Insurance has total market cap of Rs 143 billion or 1.6% of KSE.
9. Chinoy Group includes Pakistan Cables, International Industries, and International Steel. It has market cap of Rs 90 billion or 1% of KSE.
10. The Saigol Group includes companies such as Pak-Elektron, Maple Leaf Cement, and Kohinoor Textile Mills. It is worth Rs 79 billion accounting for 0.9% of KSE.
11. JS Group includes Jahangir Siddiqui Company, JS Bank, Bank Islami, JS Investments, and JS Global. It is worth Rs 43 billion or 0.5% of KSE.
In addition to publicly traded companies, there are several large highly valued privately held business and industry groups like Jang Group, Hashoo Group, Bahria Town and others.
Dawood Group
Dawood Group is the second largest among the top 11 publicly traded business groups which make up a third of the total market capitalization of the Karachi Stock Exchange.
In a keynote address at OPEN Forum 2018, the annual conference of Pakistani entrepreneurs in Silicon Valley, Husain Dawood of Dawood Group in Pakistan told the story of his family's business starting in 1947. This story is probably representative of most of the rest of the business and industry groups in the country.
Seth Ahmad Dawood, the patriarch of the Dawood family, started his textile business in India before 1947. He lost everything when he fled to what became Pakistan after the partition of India. He rebuilt his business in both East and West Pakistan. The family lost half its business in what became Bangladesh in 1971. What was left of the business was confiscated by Zulfikar Ali Bhutto government in West Pakistan.
The Dawood family was able to rebuild its business under General Zia ul Haq's pro-business military government that followed after Zulfikar Ali Bhutto was deposed in a military coup.
The best days for Dawood Group came during General Musharraf's pro-business government in years 2000-2007 under Husain Dawood who took charge after the death of his father Ahmad Dawood. He led the diversification drive from textiles into chemicals, foods, fertilizers, power and communications businesses.
The Dawood Group invested $1 billion in the world's largest fertilizer plant and took on a lot of debt. The Musharraf government committed gas supply as an incentive for the group to invest. The PPP government led by Asif Zardari demanded payoff to deliver on the commitment to supply gas for the fertilizer plant. Dawood's refusal to pay off the PPP officials meant that the group's investment sat idle until 2013 when Nawaz Sharif's pro-business PML-N government came to their rescue. The Dawood group and other business and industry groups have thrived since 2013 with a pro-business government in charge.
(Riaz Haq is a Silicon Valley based Pakistani-American analyst and writer. He blogs at www.riazhaq.com)
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