| Location and Size | Credit and Collections |
| Government | Risk Assessment |
| Legal System | Business Climate |
| People | Business Protocol |
| Economy | |
| Comparative Indicators |
12345
Location and Size
Pakistan is located in southern Asia, bordering the Arabian Sea, between India on the east, Iran and Afghanistan on the west, and China in the north. Its land area is 803,943 sq. km. (310,527 sq. mi.); almost twice the size of California.
Government
Parliamentary democracy. Pakistan achieved independence from Great Britain in 1947.
The prime minister heads the cabinet, but the president chairs the powerful National Security Council, which comprises military chiefs and cabinet members. The president can also dismiss the prime minister, the cabinet and parliament.
Branches of the government include:
- Executive: President Asif Ali Zardari (since 10 March 2024)
- Legislative: Bicameral Parliament or Majlis-e-Shoora consists of:
Senate (100 seats; members indirectly elected by the 4 provincial assemblies and the federal capital territory indirectly elected by the National Assembly using proportional representation vote; members serve 6-year terms with one-half of the membership renewed every 3 years)
National Assembly (342 seats; 272 members directly elected in single-seat constituencies by simple majority vote and 70 members – 60 women and 10 non-Muslims – directly elected by proportional representation vote; all members serve 5-year terms) - Judicial: Supreme Court of Pakistan (consists of the chief justice and 16 judges)
Legal System
Pakistan’s legal system is based on English common law with provisions to accommodate Pakistan’s status as an Islamic state. Pakistan accepts compulsory International Court of Justice (ICJ) jurisdiction with reservations.
In constitutional law matters Pakistani jurisprudence has been greatly influenced by the United States legal system, Pakistan has adopted a US-style Federal Structure. Islamic law and traditional jirga-based law has also influenced the country’s judicial development.
People
- Population: 235,862,518 (2024)
- Population growth rate: 1.9% (2024)
- Languages: Urdu (national and official), English (official), Punjabi, Sindhi, Pushtu, Baloch, Hindko, Brahui, Saraiki (Punjabi variant)
- Literacy: 57.9% (2024)
- Ethnic Make-up: Punjabi, Sindhi, Pushtun, Baloch, Muhajir (i.e., Urdu-speaking immigrants from India and their descendants), Saraiki, and Hazara
- Religions: Muslim 96.4% (85-90% Sunni, 10-15% Shia); small minorities of Christians, Hindus, and others.
Economy
Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India.
U.S. assistance has played a key role in moving Pakistan’s economy from the brink of collapse to setting record high levels of foreign reserves and exports, dramatically lowering levels of solid debt. However, the economy is very dependent on low value-added sectors (textiles, cotton); thus, subject to intense competition from China. Insufficient levels of investment and spending on education have hampered a move to higher value-added production.
- Currency: Pakistan rupee (PKR)
- Leading Markets (2023): US 17.7%, UK 7.7%, China 6.0%, Germany 5.8, 4.5%, Afghanistan 5.2%, UAE 4.5%, Spain 4.1%
- Leading Exports – Commodities: Textiles (garments, bed linen, cotton cloth, yarn), rice, leather goods, sports goods, chemicals, manufactures, carpets and rugs
- Leading Suppliers (2023): China 27.4%, UAE 13.7%, US 4.9%, Indonesia 4.3%, Saudi Arabia 4.2%
- Leading Imports – Commodities: Petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel, tea
- Top Industries: Textiles and apparel, food processing, pharmaceuticals, construction materials, paper products, fertilizer, shrimp
- Agricultural Products: Cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs
Comparative Economic Indicators – 2024
| Pakistan | Indonesia | Malaysia | Philippines | India | Thailand | |
| Population (millions)* | 235.8 | 262.78 | 31.8 | 105.8 | 1.339 (billion) | 68.9 |
| Population growth rate (%)* | 1.9% | 0.83% | 1.5% | 1.55% | 1.04% | 0.25% |
|
Age Structure (%)
(15 to 64 years old) |
73.04% | 68.11% | 66.17% | 62.32% | 74.40% | 68.55% |
|
Age Structure (%)
(65+ years old) |
11.84% | 7.26% | 6.35% | 4.61% | 7.9% | 5.82% |
| Literacy (%) | 57.9% | 95.4% | 94.6% | 96.3% | 77.7% | 82.6% |
| Unemployment rate (%) | 4.35% | 5.4% | 3.4% | 5.7% | 9.7% | 6.40% |
| Inflation (%) | 4.8% | 3.8% | 3.8% | 2.9% | 2.83% | 5.30% |
| Population below poverty line (%) | 24.3% | 10.9% | 10.7% | 21.6% | 4.86% | 24.90% |
| GDP** (USD billion) | $1,211.0 | $3,250.0 | $933.26 | $877.2 | $3.417 (trillion) | $34.98 |
| GDP real growth rate (%) | 6.49% | 5.1% | 5.9% | 6.7% | 7.2% | 4.90% |
| GDP per capita** (USD) | 5,200 | 12,700 | 29,100 | 8,400 | 5,100 | 5,300 |
| Public debt (% of GDP) | 72.9% | 28.90% | 54.1% | 39.2% | 39.50% | 33.30% |
| Industrial production growth rate (%) | 1.1% | 4.1% | 5.0% | 7.2% | 7.26% | 5.34% |
| Exports (USD billions) | $57.9 | $168.9 | $187.9 | $48.20 | $79.80 | $51.94 |
| Imports (USD billions) | $34.3 | $150.1 | $160.7 | $89.39 | $54.70 | $42.75 |
| Reserves of foreign exchange and gold (USD billions) | 343.7 | 130.2 | 102.4 | 81.57 | 96.6 | 49.5 |
| Currency | Rupee (PKR) |
Rupiah (IDR) |
Ringgit (MYR) |
Piso (PHP) |
Rupee (INR) |
Bhat (THB) |
| Exchange rates (per USD) 4/3/2024 | 0.0036 | 0.000064 | 0.21 | 0.18 | 0.12 | 0.28 |
| Exchange rates (per EUR) 4/3/2024 | 0.0033 | 0.000059 | 0.19 | 0.16 | 0.11 | 0.26 |
*Economic Data from CIA World Factbook
** PPP Purchasing Power Parity
Credit and Collections
Debt collection companies, including their key appointment holders, must also be assessed by Police to be fit and proper before they are allowed to offer debt collection services. As of March 1, 2024, all debt collection companies must be licensed to carry out debt collection activities.
Risk Assessment
Coface Country Risk Rating: C — A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high.
Business Climate
Despite its economic and political difficulties, Pakistan has taken steps to liberalize its trade and investment in the context of commitments made with the WTO, IMF, and the World Bank. In recent years, Pakistan has actively been trying to become a more open economy in order to attract more foreign direct investment. The government has tried to implement economic reforms that include privatization, liberalization and deregulation aimed at making the economic system more investor-friendly and less bureaucratic.
In 2000, the government made significant macroeconomic reforms: privatizing Pakistan’s state-subsidized utilities, reforming the banking sector, instituting a world-class anti-money laundering law, cracking down on piracy of intellectual property, and moving to quickly resolving investor disputes.
Cross-border Trade: Imports are subject to a high average tariff rate and burdensome non-tariff barriers.
Transparency of Regulatory System: Pakistan’s financial market, though advanced for the region, is constrained by regulation and bureaucracy. A number of government agencies oversee commercial and financial regulatory regimes, and, while Pakistani law provides for recourse against adverse administrative decisions, the legal system remains backlogged and long court delays are common.
Protection of Property Rights: Pakistan’s legal system offers incomplete protection for the acquisition and disposition of property rights. Pakistan has identified intellectual property protection as a key area for its “second generation” economic reforms. Pakistan has enacted five major new laws relating to patents, copyrights, trademarks, industrial designs and layout designs for integrated circuits in the past few years, but their impact has been limited by weaknesses in the legislation and enforcement.
Other significant problems also remain. Book piracy, weak trademark enforcement, lack of data protection for proprietary pharmaceutical and agricultural chemical test data, and problems with Pakistan’s pharmaceutical patent protection remain serious barriers to trade and investment.
Conversion and Transfer Policies: Pakistan has a liberal foreign exchange regime with few restrictions on holding and transferring foreign exchange. There are no limits on the remittances of profits, dividends, debt service, capital, capital gains, returns on intellectual property, or payments for imported inputs.
Corruption: Business in Pakistan is seriously impeded by corruption. Operating and conducting business can be cumbersome and slow although the government has taken measures towards creating a more efficient business environment. 40% of companies in Pakistan state that corruption is one of their major concerns.
Companies involved in import-export activities are effected by corruption in tax and customs. Foreign investors often use local agents in order to facilitate interaction with Pakistan’s cumbersome bureaucracy. However, investors are legally liable for the corrupt behavior of agents acting on their behalf and therefore companies are generally advised to carry out extensive due diligence prior to committing funds in the country.
Economic Freedom: According to the 2024 Index of Economic Freedom, Pakistan’s economy is 49.5% free, making it the world’s 147th freest economy. Pakistan scores moderately well in fiscal freedom, business freedom, and labor freedom. Pakistan has weak trade freedom, investment freedom, financial freedom, property rights, and freedom from corruption.
Political Violence: There are significant threats to foreign interests in Pakistan from al-Qaida, the Taliban and domestic terrorist organizations. The U.S. Embassy is operating on reduced staffing with no non-working dependents at post; most other Western diplomatic missions have reduced staff levels. All major Western countries, including the United States, have issued travel advisories recommending against non-essential travel to Pakistan. Continuing tensions in the Middle East also increase the possibility of violence against Westerners in Pakistan.
Business Protocol
Islam is practiced by the majority of Pakistanis and governs their personal, political, economic and legal lives. Third-party introductions are a necessity as Pakistanis prefer to work with people they know and trust.
Appointments: Appointments are necessary and should be made in writing, 3 to 4 weeks in advance, although meetings with private companies can often be arranged with less notice. The best time to schedule meetings is in the late morning or early afternoon. Arrive at meetings on time and be prepared to be kept waiting. It is not uncommon to have a meeting cancelled at the last minute.
Business Cards: Business cards should include any advanced university degrees or professional honors, as they denote status. Business cards are exchanged using the right hand only or with two hands. Make a point of studying any business card you receive before putting into your business card holder.
Business Attire: Conservative. Businesswomen should wear longer skirts and keep their arms covered.
Conversation: Pakistanis often ask personal questions as a way to get to know you as a person. In general, Pakistanis speak in a circuitous fashion. Direct statements are made only to those with whom they have a long-standing personal relationship. They also use a great deal of hyperbole and go out of their way to find something to praise. Be prepared to flatter and be flattered. Pakistanis prefer to converse in a non-controversial manner, so they will say they “will try” rather than admit that they cannot or will not be able to do something.
Meetings: In general, Pakistanis have an open-door policy, even when they are in a meeting. This means there may be frequent interruptions, or other people may wander into the room and start a different discussion. Business meetings start after prolonged inquiries about health, family, etc.
During the first several meetings, business may not be discussed at all as the relationship is still being developed. Maintain indirect eye contact while speaking.
Negotiations: Companies are hierarchical. Decisions are made by the highest-ranking person and are reached slowly. Do not try to rush things, as that will give offense and potentially jeopardize the business relationship. This society is extremely bureaucratic. Most decisions require several layers of approval. If you change negotiators, negotiations will have to start over since relationships are to the person and not the company that they represent.
Acceptable Public Conduct: Never inquire about a colleague’s wife or daughters.
**********
Subscribe to the Credit-to-Cash Advisor
Monthly e-Newsletter — It’s Free
This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries. For further information, contact [email protected].