One can tell a lot about the future of economy by looking at its new firm incorporation data, and the scope of their intended operations.
That China has come to dominate new firm incorporation is now pretty much established. Using new firm data, this column flagged it earlier this year. (For more on Sino-FDI, read BR Research columns: Reading the pulse of Chinese FDI in Pakistan, Feb 22, 2017). That trend has continued in the year to date.
Of the 29 new foreign firms incorporated in 5MFY18, 10 are from China and 4 from Hong Kong. The SECP data reveals that 10 of the foreign firms incorporated in 5MFY18 are in construction or construction allied sectors, whereas four of those are in engineering sector.
The number of Chinese companies incorporated in Pakistan had already crossed that of the UK in FY17, and now looks poised to become the biggest foreign player in terms of number of firms by likely crossing the number of US firms over the next two to three years. That should push universities and business schools in Pakistan to produce business and economic research relevant to the new reality in the country. So far, they have been lagging behind.
As far as sectoral compositions of new incorporations are concerned, construction, informational technology and firms engaged in trading are far outstripping the manufacturing sectors. Au contraire, the share of export oriented manufacturing firms has remained thin for the last many years. This mirrors the trends in the manufacturing and service sector GDP growth. And at the same time it raises a question that the government, businesses and policy community need to answer: are the days of five export oriented sectors rather limited, if not numbered yet.
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