Today, Pakistan was once again inundated with a stream of negative news developments. I began this post doing a run-down of the news – from Sufi Muhammad of the Tehreek-e-Nifaz-Shariat-Mohammed [TNSM] announcing that he has pulled out of the government peace deal in the Swat region [the PATA – Provincially Administered Tribal Areas], to the Swat Taliban gaining a foothold in Buner just 60 miles northwest of Islamabad, to violence breaking out in Balochistan after the bodies of three leaders of nationalist groups were found. However, after almost finishing a long post on the dilemma of peace in Swat, I realized I was repeating a lot of the same adamant statements I have made week after week on CHUP.
So I deleted what I wrote, took a deep breath, and here I am trying again. Despite all the negative news of late, there have been some positive developments in Pakistan in the last few days. According to the Financial Times yesterday, Pakistan has received an endorsement from one of the biggest names in the global advertising industry – WPP. Sir Martin Sorrell, the chief executive of the company, told the FT, “Despite all the political and security issues … our businesses in Pakistan continue to grow strongly. We plan to continue to grow there and develop our industry leading position in the country.”
And, according to the news agency, the WPP is not the only company looking to do so. “Public and private companies, including Antofagasta, the Chilean mining company, and Abraaj Capital, the Dubai-based private equity group, are seeking opportunities in Pakistan,” [Antofagasta has had a presence in Pakistan before.]. In fact, acquisitions by countries like the UAE, Malaysia, and Singapore accounted for half the cross-border deals of the past five years. Abraaj in particular agreed to a $361 million deal to buy half of KES Power, the holding company of Karachi Electric Supply Company, noted the news agency. Omar Lodhi, of Abraaj, told the FT, “Our focus in Pakistan is to purchase defensive assets, like power, infrastructure, distribution, or downstream oil and gas…We work with them to develop them for sale to strategic groups.”
Here’s another interesting tidbit of information: Financial Planning reported that the markets enjoying the largest growth in 2009 have been Pakistan (up 49.5%), Brazil (up 26%) and Russia (up 17.4%), based on the MSCI Emerging Markets indexes as of April 3. Why is this significant? As the global economic recession continues to impact the international community, it appears that emerging markets have proven to be a top performer in the international market in 2009.
This is not to say that Pakistan’s ground realities have not impacted investment. In fact, several companies are only making small-scale investments in the energy and infrastructure sectors, a sign they are still being cautious. The telecommunications and financial industries, in contrast, are the two most targeted sectors by foreign investors, accounting for 52% and 35% respectively.
The relative end of the recent political turmoil/stand-off/duel/[insert other synonyms at will] has also bolstered Pakistan’s stock markets. According to Dawn, the market “has rebounded 27.5 percent in three weeks.” The news agency added, “The benchmark index of the Karachi Stock Exchange, the KSE-100, has now recovered more than 58.5 percent since hitting a four-year low of 4,815 points in late January. It closed at 7,635.88 on Tuesday.”
According to Mohammad Sohail, an independent analyst cited by Dawn, this marked “the fastest recovery of our stock market in history.” Shuja Rizvi an analyst formerly with Capital One Equities, noted the recovery has much to do with the current political situation, asserting, “The market is expected to grow as long as political stability remains.”
Rizvi further echoed the FT report noted above, adding, “Foreigners are still skeptical but their ratio of selling is slowing. This shows they are gaining confidence and it is not as chaotic as January to March when they sold 250 million dollars worth of shares.” Domestic investors, meanwhile, are also increasingly divesting their money from abroad and re-investing it in Pakistan, a welcome trend.
Another welcome development dealt with the current security situation. Although Swat militants have shifted into Buner, [see above] The News today reported that villagers in the area dug up roads to block the Taliban, taking up positions “at vantage points in the hills to fight the militants.” The news agency reported,
All these measures were taken following the arrival of Taliban fighters from Swat into the Darra Gokand and their clash with the police and volunteers from the villages in the area…Meanwhile, it was learned that villagers in Chagharzai, Amazai, Chamla and Khadukhel held separate, largely attended, Jirgas in which they made it clear to the government that they were opposed to the presence of both Taliban militants and the security forces in their areas and would instead prefer to defend their villages on their own.
This development is significant because local civilians and villagers are often depicted as the “victims” in these situations. The fact that they are reportedly now taking up arms is vital in enforcing perceptions that Pakistan’s populace are not just against the Taliban, but are also willing to be actors in the fight against them. That to me is a pretty important silver lining.