ATLAS GROUP

ATLAS GROUP

Investment Climate in Pakistan

From A Private Sector Point of View

10 May 2006

SAQUIB H. SHIRAZI
ATLAS GROUP

2
Population & GDP of each province
About Pakistan
In PAKISTAN

Provinces Population
Punjab 90,080,000
Sindh 35,520,000
NWFP 26,240,000
Balochistan 8,160,000
PAKISTAN TOTAL 160,000,000
 ATLAS GROUP

PAKISTAN BALANCE SHEET

+++ ---

Manpower pool
Population

 Plenty
 Trainable

Debt burden
 Entrepreneurial spirit
Social sectors
 Cost competitive

Developed low tech. vendor industry

Small and medium enterprise

Investor friendly policies

Stable Government
 ATLAS GROUP

Economic Profile of Asian Countries

Description China India Indonesia Thailand Vietnam Philpines Pakistan Malaysia
Population (M) 1,300 1,103 212 64 88 86 159 24

Population Growth % 1 2 1 1 1 2 2 2

Rural % 59 72 57 68 74 40 66 36

Urban % 41 28 43 32 26 60 34 64

Poverty % 5 29 16 13 29 28 33 16

Un-employment % 10 10 9 2 6 11 8 4

Inflation % 5 4 6 3 3 5 5 2

Per capita Income $ 1,090 605 710 2,190 483 1,050 652 3,780

GDP Growth Rate % 10 6 5 6 7 5 6 6

Industry Growth % 11 7 4 12 16 5 13 9

Road Length KM 1,402,698 3,319,644 342,700 64,600 93,300 201,994 254,410 65,877

CARS Units 2,200,000 668,383 420,000 197,800 26,922 98,167 150,000 415,000

M/Cycles Units 12,000,000 5,148,418 3,600,000 2,026,841 870,000 475,000 500,000 272,685
PERSON PER CARS 591 1,650 58 324 876 3,269 1,615 505

PERSON PER M/Cycles 108 214 88 32 181 101 398 59

 ATLAS GROUP

Pakistan Vs Asian Countries

Description Pakistan Standing
Population 4th

GDP Growth 3rd

Poverty Ratio 8th

Industrial Growth 1st

Motorcycle Annual sales 7th

Car Sales 6th

Per Person Sale of New vehicle:

Motorcycle 8th

Cars 7th
 ATLAS GROUP

Risk Ratings

Pakistan Vietnam Thailand India Indonesia Malaysia Philippine China

Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score Rating Score

Overall assessment D 66 C 57 C 49 C 54 D 61 B 35 C 52 C 50

Security Risk E 82 A 18 C 50 C 54 D 75 B 25 E 82 B 29

Political Stability Risk E 85 C 60 C 60 B 40 C 45 C 50 C 55 D 65

Govt effectiveness risk D 75 D 79 D 71 D 71 D 79 C 54 D 61 D 75

Legal & Regulatory Risk C 59 C 53 C 58 C 60 D 78 B 40 C 55 D 70

Macroeconomic Risk C 55 B 40 B 25 B 25 C 45 A 15 C 50 B 25

Foreign Trade &

Payment Risk C 55 C 54 B 39 C 54 C 43 B 32 B 32 B 36

Tax Policy Risk C 50 C 50 B 31 C 56 C 50 B 25 B 31 B 31

Labor Market Risk C 50 D 71 C 50 D 61 D 64 C 50 B 36 D 64

Financial Risk C 54 D 71 C 42 C 42 C 50 B 29 C 54 B 38

Infrastructure Risk E 81 D 78 D 69 D 75 E 84 B 31 D 63 D 69
 ATLAS GROUP

5000
PAKISTAN’S
Pakistan'sG.D.P.
Political GROWTH RATE
& Economic Dynamics

4500 Decade of Development 8 Govt. Changes

4000
Real GDP (Rs.in Billion)

Devaluation

Soaring Oil Prices / Rising Inflation

3500

Nationalization / Devaluation

Tension on Indo-Pak Borders

Gen. Musharaf take over
Nuclear Test / Sanctions
3000

US (Allied) vs. Iraq War

2500

Election 2002
Afghan Crisis

Zia Air Crash

Afghan War
Martial Law
Martial Law

2000
War

1500

1000

500

0
1951 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005
Average Growth 3.0% 3.1% 6.7% 6.5% 4.0% 5.3% 6.6% 5.6% 4.8% 4.0% 1.8% 3.1% 4.8% 6.4% 8.4%
Average Growth 1951 - 2005 - 4.95%
Source: State Bank of Pakistan
 ATLAS GROUP

Investor Concerns
Sr # INVESTOR CONCERNS RECOMMENDATIONS

1 Low image of country On the right path. Stick to the course.

2 Infrastructual support.  Urgent need for an elite bureaucracy.

 Fair regulation.

3 Slow modernization Textile / leather industry is fast modernizing Vision in

place & is now beginning to produce world
competitive goods. Threat even to US.

4 Pakistanis are not investing. From the 1990s, some over capacity was left
unutilized. This prompted an investment slow-down.
Situation is changing.

5 Investment, Promotion & Protection. Should always be the 1 agenda. Attracting Investors is
a difficult job but retaining them is even more difficult.

6 Culture of Rules & Regulations. To be adhered by both Investors & Government.

 ATLAS GROUP

NECESSARY FOR SUCCESS

Good Combination
Of
Pakistan Side Multinationals
Local Know-Who + Technical Know-How

=
Prosperous Joint Ventures
 ATLAS GROUP

Atlas Group’s Collaborations

ATLAS MNCs
1960s
Atlas Autos Collaboration with Italian Scooter maker.
Atlas Epak / Atlas Honda Collaboration with Honda Motor.
Atlas Battery Collaboration with JSB.

1970s
Shirazi Trading Company. Distribution of MNC products (M.A.N., Canon).

1980s
Atlas Office Equipment. Canon / Pitney Bowes / HP Distributorship.
Atlas Lease. Bank of Tokyo participation & management support.

1990s
Atlas Bank. Bank of Tokyo participation & management support
Honda Atlas Cars. Collaboration with Honda Motor.
Introduction of automotive suppliers. 20 collaborations with Japanese suppliers established.

2000s
Total Atlas. Collaboration with TOTAL of France.
Atlas Asset Management. Joint Venture with ING of Holland.
Atlas Commercial Bank. TC with ING of Holland.
 ATLAS GROUP

Need for a Balanced Growth Strategy

 Export industries:
 Textile modernization & up-gradation.
 Leather industry.
 Software & Agro-based.
 Import substitution:
 Pharmaceuticals, chemicals growth.
 Automotive, engineering & electronics.
 Strategic industries:
 infrastructure & construction.
 Defence.
 Oil & gas.
 ATLAS GROUP

Market Potential
 ATLAS GROUP

Current Scenario (2005)

MARKET OPPORTUNITIES Pakistan Vietnam Thailand India Indonesia Malaysia Philippine China

GDP per head (US $ at market rates) 3rd Lowest 736.0 540.0 2,489.0 615.0 1,149.0 4,523.0 975.0 1,223.0

Household Consumption per head (US $) 3rd Lowest 454.0 340 1,420.0 410.0 810.0 1,880.0 680.0 520.0

CONSUMER GOODS
Television (stock per 1000 of population) 3rd Lowest 174.8 239.0 331.0 88.0 180.0 212.0 166.0 386.0

Television sets, sales volume (,000) 3RD Lowest 1000.0 1,563.0 2,192.0 8,848.0 2,131.0 256.0 293.0 33,059.0

FOOD & DRINKS

Food, beverages & tobacco (% of household spending) 55.9 29.3 30.2 43.4 58.9 24.6 39.6 31.2

ENERGY

Electricity consumption (KWH per head) Lowest 467.0 533.0 1,691.0 539.0 480.0 2,823.0 568.0 1,580.0

Petroleum consumption ( 000 B/D) 2nd Lowest 395.0 - 911.0 2,284.0 1,181.0 555.0 329.0 6,508.0

TELECOMMUNICATION

Telephone main lines (per 100 pop) Lowest 3.5 6.30 12.00 4.30 4.60 17.80 4.40 24.00

Mobile subscribers (per 100 pop) 2nd Lowest 7.0 54.0 36.0 10.4 14.4 53.4 34.3 25.4

Personal computers stock (per 1,000 pop) Lowest 7.5 22.0 36.0 12.0 13.0 - 23.0 45.0
 ATLAS GROUP

Current Scenario(2005)

HEALTH Pakistan Vietnam Thailand India Indonesia Malaysia Philippine China

Health spending (US $ per head) Lowest 25.0 - 157.0 32.0 28.0 136.0 35.0 69.0

Physicians (per 1,000 pop) 4th Lowest 0.7 - 0.4 0.5 0.2 0.8 1.3 1.5

Health Care is personal expense, so left over income to buy Consumer Goods is on lower side.

FINANCIAL SECTOR

Total lending per head US $) Lowest 230.0 340.2 3,219.0 380.2 593.0 600.8 7,314.0 1,946.0

Total lending % of GDP Lowest 45.0 63.3 129.0 61.8 53.6 61.6 161.7 178.8

TRAVEL & TOURISM

International tourism, arrivals ('000) Lowest 581.0 1,584.0 11,851.0 3,359.0 5,322.0 13,256.0 - 37,584.0

International tourism, receipts (US $ M) Lowest 145.0 1,128.0 8,946.0 3,957.0 4,685.0 8,163.0 - 20,310.0
 ATLAS GROUP

Opportunities Based on Pakistan Fundamentals

 Agriculture

 Textile (High Value End)

 Oil & Gas

 Power

 Information Technology

 Automobile Sector

 Infrastructure
 ATLAS GROUP

Auto Sector- Key Financial Figures Growth Trend

Auto Industry
Description Unit
2005 2010 % increase

Contribution to GDP Rs. In Billion 218.06 368.80 69.12

Revenue to GDP Rs. In Billion 73.03 121.00 65.68

Direct Em ploym ent in No. 197,400.00 292,150.00 47.99

Investm ent Rs.in Billion 124.01 232.75 87.74

Im port substitution US$ in Billion 3.27 5.58 71.25

Foreign exchange savings US$ in Billion 1.42 2.83 97.18

 ATLAS GROUP
Auto Financing in Pakistan

Financing(Rs. in M illt ion) Rat es %

40000 25%
23%
35000 22%
20%
30000 19%
17%
25000 15%
20000
15000 10% 10%
9.5%
8%
10000
5%
5000
0 0%
98-99 99-00 00-01 01-02 02-03 03-04 04-05

With decreasing interests rates, auto financing has gone up from Rs. 737m in 97-98 to
Rs. 36bn by June 05
 ATLAS GROUP

Pakistan Auto Sector Production Targets

Cars Motorcycles

1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
 ATLAS GROUP

Basics for Business Investment Climate

 Stability and Security  Govt. Policies-Behavior

 Consistency in Policies and  Business Cost
Predictability  Business Risks

 Regulation and Taxation  Business Potential

 Finance and Infrastructure  Geographic Locations

 HR Development  Market Size

 Consumer Preference
 Mega Projects - Infrastructure

Doing Business Costs:

 Starting a Business
 Hiring/Firing
 Enforcing Contracts
 Getting Credit
 Closing Business
 ATLAS GROUP

Role in Economic Development of Pakistan

 Foreign Aid

 State Enterprise

 Multi National Company

 Local Private Sector

 ATLAS GROUP

Need for a Balanced Growth Strategy

 Export industries:
 Textile modernization & up-gradation.
 Leather industry.
 Software & Agro-based.
 Import substitution:
 Pharmaceuticals, chemicals growth.
 Automotive, engineering & electronics.
 Strategic industries:
 infrastructure & construction.
 Defence.
 Oil & gas.
 ATLAS GROUP

LESSONS

 Managing uncertainty requires professional

management.

 Volatility is part of business.

 Reputation / Image are important.

 Collaborate with people better than yourself.

 Avoid Hubris.
 ATLAS GROUP

THANK YOU!