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MNCs in Pakistan – The darker and the brighter side
MNCs in Pakistan
Pakistan is a growing economy with a population of 187 million as of 2011. There is a strong middle class of 30 million people. This represents almost 16% of Pakistan. Whereas there are 36 million plus people (about 65%) which are in the age bracket between 20-25 years. Such kind of a growing population statitcs represents a positive indicator for the requirement of an improved life style. Represented by the influx of these young professionals as the potential consumers in the Pakistani Market.
Such a towering figure of consumer who has ever increasing demand will not be catered by the local industry alone. This is where the growth of the Multinational companies in Pakistan comes from. These better educated and better aware individual demands commodities to improve their standard of living. Such an environment becomes favorable for the MNCs in Pakistan.
The above mentioned factors act as positive indicators for any operational Multinational Corporation in Pakistan. Irrespective of the industry these MNCs are functioning in the FDI figure growth of $ 15 million (which is an 8 year cumulative figure) as per the FBR, which is a sound achievement.
One of the biggest attractions for these Multinational Corporations in Pakistan is the availability of cheap labor. Since Pakistan serves as one of the top 3 countries which have cheap labor, but Quality wise it is better than the rest of the countries in the region (such as India, Bangladesh and Sri Lanka even). Since the financial crisis has brought about a great change in the educational environment of the western countries as well, therefore the local resources are returning form abroad and are influenced to be a part of the MNCs in Pakistan.
Expansion of the infrastructure is a policy for the growth of the MNCs in Pakistan. As there is a rural population representing about 28% of the total population which present huge potential. Countries like Unilver and Nestle have contributed huge invested in expanding the office, distribution network and factories and outlets. Siemens have invested Euro 2 Million worldwide, out of which a major portion has been dedicated for development in Pakistan especially Sindh. As per a recent survey conducted on the presence and recent trend of the Multinational Corporations in Pakistan, a minimum size for office infrastructure is of 60,000 sq/ft per area.
Consumer Health body, designed for the public health protection has little or no interference in the market. Lack of regulation in the local market makes it easy for the Multinational Companies in Pakistan to experiment with food and flavor of different sorts. As the net effect will be gain in the form on revenue by charging a premium. Another aspect is the ‘Multination Company’ mindset of the people. The middle and upper class prefer to consume product made by an MNC due to its quality and durability. Whereas the local market is largely discouraged based upon cheap quality. Liberal Government Regulation, for MNCs are an opportunity for any MNCs planning to have its position in list of the MNCs in Pakistan. Since this means little or no interference from the Government sector, which leads to monopoly of the biggest market player.
Exchange rate is one of the important factors in terms of rating profitability. The Rupee to Dollar rate is at its peak. This mean extra revenue generation for the profits and dividends that is repatriated by the MNCs back to their home county.
There are several discouraging factors for the MNCs in Pakistan as well. One of the biggest concerns is the unethical practices followed by the local players in the market. Such as fake medicines are causing multinational companies in Pakistan a reputation problem. About half the Pakistan’s population has access to fake medicines as per a report of 2008 by Pakistan Medical Association.
Political Influence is being exercised at all levels of recruitment process by the local government as well as political office holders. This is something that hinders the multinationals policy for equal employment opportunity.
Low Infrastructure of transportation and technology hinders the progress of the MNCs to reach the untapped market. Poor service quality of railway, aviation and transportation industry is a major issue. Whereas technologically, Pakistan is still far behind as compared to most of the countries in the region (especially India who has a thriving I.T Industry). Both these factor are cause administrative as well as distribution issues at all level.
Finally, the most pertinent factor is Law & Order and unstable political situation. The law enforcement agencies in Pakistan are considered the worst in the word. With the latest survey showing that an individual Pakistani does not have a ‘Truth’ factor involved when it comes to dealing with the law enforcement and judiciary. Secondly, the unprecedented level of strikes caused by the shortfall of energy has caused a setback not only to the local but also the existing Multinational companies in Pakistan.