Pak corporates – challenges to growth

Pak corporates have had a roller-coaster side up, down and sideways with field shots and slam dunks.

By the 1960s the industry was chugging along with a heady mix of multinational companies (MNCs) and the 22 families, plus small and medium enterprises (SMEs) in the Industrial Quadrangle – Lahore-Faisalabad-Gujranwala-Sialkot. Then the separation of East Pakistan chopped off 40% of the market. The coup de grace was the Nationalization of 1973. Business never recovered. What now?

The three business classes – the Bazarai class (traders), the Seths, and the big corporates are working to stay afloat. In a country of 248 million people economy activity never stops. But can it expand—domestically and abroad? A month ago I had lunch with the trade commissioner of a Pacific Rim Economic Super Power.

He narrated a litany of woes—from social isolation to bad business practices. A week later the largest manufacturing facility from this country shut down. Buying out exiting companies appears to be a big business driver. A litany of complaints can fill columns after columns of newspapers – as it has. Perhaps I can focus on a few factors that are not among the usual culprits.

1- The mindset: The corporates have developed a “defeatist” mindset. Navigating the real and perceived hurdles, they do not wish to invest in equity unless a positive return is assured – as in the case of IPPs. Many families remember the nationalization of 1970s, and prefer to keep a low profile. Many groups prefer to set up small units, scattered around the country, rather than one large unit.

2- Family control: Pakistan corporates do not wish to relinquish family control. Whether this stems from cultural factors, or insecurity, is debatable. The family members or their nominees control the decision-making processes. This is OK if the corporation is mid-sized. For larger corporates, the reliance has to be on input from professionals, i.e., strategists, finance, marketing, etc. The “family factor” is an interest disqualifier for large scale business growth, especially for overseas operations.

3- Corporate strategy. Strategic thinking and planning lie at the heart of business success. A company strategy needs to cover every aspect of its business: from what it sells and to whom, through how it organizes its finances, and where it operates. Strategy is alien to Pak corporate; their refrain has always been that the ‘uncertainties’ are too great for long-term planning. Maybe, maybe not! Even the MNCs operating in Pakistan did limited corporate planning locally. The regional offices of MNCs did the planning, sometimes by-passing the local affiliates. The Securities & Exchange Commission of Pakistan (SECP) is trying rather unsuccessfully to introduce this concept for publicly quoted companies.

4- Difficulty in sourcing project finance: Pakistan is a country with no large development financial institution (DFI). A few joint venture DFIs exist – PAKOMAN, PAK KUWAIT, etc. But the four large ones have closed down for various reasons – NDFC, Bankers Equity, PICIC and ADBP. In their heydays the above four played a major role in project financing. Currently, an Investor cannot access project financing (7 to 10 years tenor) in the true sense the commercial banks do not extend financing for long tenors, nor do they have the technical expertise to evaluate a project – financially, economically, technically etc. This is a serious deficiency. MOF needs to address this ASAP.

Copyright Business Recorder, 2025