The last decade witnessed a number of revolutionary changes in the Pakistani capital and financial markets. While the markets struggled to bounce back from the trickle-down effects of the global financial markets meltdown, the market regulators stepped up their efforts to institute major regulatory, structural and operational reforms to mitigate risks faced by the markets. The rapid paceat which these markets have evolved in Pakistan, proves that Pakistan has shown significant resilience in the face of both internal and external crisis and challenges and fared well on many fronts.
As the apex regulator of the Pakistani capital market, non-bank financial market and insurance sector, the Securities and Exchange Commission of Pakistan has actively pursued a robust reform agenda to put these markets back on track and improve their outlook, both in terms of their image and their regulation. Investor protection has always been the cornerstone of this reform agenda and all measures and initiatives are based on achievement of this fundamental objective. The recent historic upgradation of Pakistan's capital market from Frontier Market to Emerging Market by the MSCI, the successful integration of the former stock exchanges into a unified trading platform, enactment of crucial legislation for the securities and futures markets, establishment of a central counter party and settlement guarantee fund as per international best practices, etc are all examples of the commitment and patronage the Government and the SECP have and continue to extend towards development of these sectors. I would extend my profound gratitude to the Government of Pakistan without whose support this agenda could not have been implemented effectively. For thisdue credit also goes to the entire stakeholders of Pakistan's financial sector.
The reform agenda instituted by the SECP for the capital and non-bank financial markets coincides with the economic development agenda of the government. The earlier reforms coupled with government's economic liberalisation and investment friendly policies have not only restored investor confidence but new avenues for investment and fund-raising have also opened. Today Pakistan is ranked as a growing and emerging regional economic power, as also witnessed by mega trade and infrastructure partnerships secured by Pakistan, and endorsed by global financial market experts, rating agencies and investment decision tools providers. We are well-positioned and better equipped to face challenges of the competitive global industry. The investability conditions have considerably improved. Also, Pakistan stands compliant with most of the International Organisation of Securities Commission (IOSCO) benchmarks of securities regulation. The compliance percentage in this regard has gone up from 37% in the year 2004 to 62% in the year 2015 and efforts are underway for achieving maximum compliance with IOSCO principles, by the end of the financial year 2016-17. Additionally, I am proud to mention that Pakistan is serving for the third consecutive term on the IOSCO board of directors which reflects its commitment toward the organized development of capital market and adopting international benchmarks.
While enumerating our most coveted achievements, I would also like to underline that our market still faces a number of challenges and need to be dealt with through long-term vision and co-ordinated strategy. The critical challenges being faced are meagre number of investors, lack of available investment alternatives, limited outreach of financial/capital market institutions and products, and most importantly, the weak link between capital market and the real economy. A very small portion of public savings reaches the real economy through the capital market. There are only a few hundred listed companies and perhaps an aggregate of a couple of hundred thousand of investors in such companies. The market capitalisation as a percentage of GDP has been very low for Pakistan as compared to other regional economies. This challenge needs to be addressed through a well-defined strategy to attract quality listings to the capital market to enable it to become a major source of capital formation for big corporations as well as SMEs. This may be achieved through a vigorous IPO generation drive which would highlight the benefits of listings to the corporate sector. The SECP, in co-ordination with PSX and with the government's support, will be accelerating its efforts to bring new IPOs to the market, given that it is an ideal time for new listings especially in the wake of the China Pakistan Economic Corridor project.Also, innovative technological solutions need to be introduced to incentivize companies to list by reducing time and cost involved in listings and post listing reporting and compliance requirements.
We should also be focusing on extending market outreach and promoting investor protection so that more and more investors are willing to participate in the market, thereby generating the desired activity and liquidity. While traded volumes have surged over the past few years and the index appears to be soaring to new heights, focus should also be made on broadening and deepening of the market, in terms of larger investor participation and breadth of available investment alternatives.
With the same in mind, the SECP engaged prominent market participants and stakeholders and has drafted a detailed Capital Market Development Plan that sets out reforms for all areas of the capital market. The Plan envisions fulfilment of critical objectives of improved governance at the capital market infrastructure institutions, particularly divestment of shareholding of PSX and securing strategic investment and technological partnerships. We are hoping that post MSCI's favourable announcement, Pakistan will have a stronger chance of attracting the desired investment and partnerships. Going forward the apex and frontline regulators will also be focusing on strengthening the enforcement regime to inculcate enhanced compliance culture. Also, efforts are being made for promoting and invigorating the SME, debt, derivatives and commodities futures segments to ensure that the investors are provided with diverse investment alternatives. Measures are also being taken for development of commodities eco-system and new futures contracts based on various agricultural commodities will be launched at the Pakistan Mercantile Exchange, in addition to efforts for expanding its outreach. Now co-ordinated and joint action is required on part of all the market institutions to ensure that all goals set in the Plan are met within the assigned two years.