More companies

First the LSM, and now the firm-level data; FY17 has proven to be a good year on both accounts. Just as the LSM growth was the highest in recent memory, FY17 also saw SECP-registered companies grow 10 percent – its highest growth since FY06.

The drivers behind this growth were the usual suspects. According to data available in the recently released SECP annual report, construction, IT, education, and auto & allied were some of the fastest growing sectors in FY17 – outpacing the growth in total incorporations. However, this should not be construed as growth in sectoral GDP, as these are only total incorporation data.

The growth in incorporation of power generation companies slowed last year to 9 percent. But that was expected since the sector had been witnessing a much sharper growth in the preceding years when its growth averaged 16 percent between FY14-FY16. Recall that most new power projects were setup in the early years of the current political regime.

Meanwhile, the growth in box-standard export oriented sectors remained weak, sans that in footwear and sports goods that saw incorporations grow much faster in FY17 in comparison to previous years.

If these export sectors are not inviting new investors at a solid pace, despite all the ‘packages’, zero rating and subsidized loans, surely the matter requires investigation.

Another sector that requires a close look – although from a different lens – is the growth in firms incorporated in corporate farming.

The sector has seen an average growth of 11 percent in the last five years – double the growth in total number of firms. Yet these firms do not appear visible in domestic retail market nor are farming exports growing each year at the same pace.

A survey on the size, status and health of these companies – both corporate farming and export-oriented sectors - is warranted. Perhaps, it could be an agenda item for think-tanks trying to figure out health of economy as well as the exports.

PS: The dragon has arrived, not only in FDI numbers but also in total incorporations. (For more on Sino-FDI, read BR Research columns: Reading the pulse of Chinese FDI in Pakistan, Feb 22, 2017).