Country Report:

Islamic Republic of PAKISTAN

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Executive Summary

This report gives useful insight to help executives and their employees live and
work successfully in Pakistan. International people will find the Pakistani people to be
very respectful because they value traditional customs and beliefs. Business protocol is
different in Pakistan, compared business protocol in the Japan. The executives must
establish a trust between them and their business counterparts before making any
business deals.
Pakistan has significantly improved the lives of many of its people and has
achieved steady economic growth. However, a third of Pakistan’s population remains
entrenched in poverty. According to World Bank report in 2006, women are at a
particular disadvantage, with lower literacy and school enrollment rates than men, and
less access to health care. It should also be noted that most of Pakistanis are Muslims, and
Pakistan is a male-dominated society.
It is suggested that companies should offer training programs to employees.
Finally, they will learn how to do business in Pakistan and how to develop relationships
with their business partners. They will also find out what is the appropriate protocol and
business customs in Pakistan.

Overview of Pakistan:

Location, Population, and History

Pakistan is located in South Asia. It shares an eastern border with India and a north-
eastern border with China. Iran makes up the country's south-west border, and
Afghanistan runs along its western and northern edge. The Arabian Sea is Pakistan’s
southern boundary with 1,064 km of coastline.
The people of Pakistan have a multi-linguistic and multi-ethnic background. In regard to
the U.S Department of State Background Notes on Pakistan, the majority of the
population is made up of Punjabis, Sindhis, Pashtuns, Baloch, and Muhajir. The ninety
seven percent of population are Muslim (Sunni 77%, Shi'a 20%), and three percent are
Christian, Hindu, and others. Pakistan is an Islamic federal republic with a population of

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approximately 165 million. The national language is Urdu, but English is widely spoken
and is one of the two official languages. The name Pakistan is derived from the Urdu
words Pak (meaning pure) and stan (meaning country). Pakistan is nearly twice the size
of California.

In 1947, as British rule came to India, Pakistan was created when the Muslim-dominated
parts of India (to the west and east) of Hindu India, were given autonomy. Those two
partitions were called East and West Pakistan and they were separated (right down the
middle) by India.
The city of Islamabad, with its mix of traditional Islamic architecture styles and modern
features, became the capital city when it was officially moved here from Karachi in 1959.
Then, in 1971, East Pakistan demanded independence, and after a bloody civil war it was
transformed into what is now called the country of Bangladesh. West Pakistan, now
present-day Pakistan has been in constant dispute with India over the Kashmir Region,
and after many wars and border disputes, the status of the area remains in limbo. In
response to Indian nuclear weapons testing, Pakistan conducted its own tests in 1998.
Today, the long-term goal of both nations is military stability, and promising discussions
continue.

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Government
Military rule was instituted in October 1999, and a nominal democracy was declared in
June 2001 by the ruling military leader, Pervez Musharraf. The Prime Minister heads the
cabinet, but the president chairs the powerful National Security Council, which comprises
military chiefs and cabinet members. The president can also dismiss the prime minister,
the cabinet and the parliament. The lower house of parliament, the National Assembly,
was elected in October 2002 for a five-year term, but has been frequently adjourned as a
result of protests by the opposition over the legality of General Musharraf's changes to
the political system. An election to the Senate (the upper house), where all four provinces
have equal representation, was held in February 2003. Provinces are represented in the
National Assembly according to the size of their population.

Economy
According to the C.I.A Fact book, Agriculture is the mainstay of economy in
Pakistan. About 42 percent of the population is involved in farming, forestry and fishing
that together contribute to 21 percent of the GDP. Barring the regions of north and the
west, which are covered by mountains, the rest of the country has fertile plains where
crops like wheat, cotton, maize, sugar cane and rice are grown. Pakistan is self-sufficient
in wheat, rice and sugar.
The industries of Pakistan, which contribute to 25 percent of GDP, involve 20 percent of
occupation. Main items exported by Pakistan include cotton cloth, tapestries, leather,
carpets and rice. In 2006 Pakistan's gross domestic product (GDP) was $ 384.9 billion.

Key Economic Indicators

Sources: CIA - The World Fact book
Population, pop. Growth rate 165,803,560
 Infant morality 70.45 70.84 (M)
70.04
(F)
 Life expectancy male female 63.39 62.40
62.44

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(F)
 HIV rate 0.10% 74,000.00 4,900.00
 Literacy rate 48.70% 61.7 (M) 35.2 (F)
 GDP 7.80% 384.90

Percent of GDP
Agricultural 21%
 Industrial 25.10%
 Service 53.30%
 GDP per capita 2400
 Percent of population below poverty 32%
 Inflation rate 9.20%
 Labor force 46.84

Percent of Occupation
 Agricultural 42%
 Industrial 20%
 Service 38%
 Unemployment rate 6.60%
 Exports and Imports 14.85b 21.26b
 External debt 39.94b
 Reserves of foreign exchange and gold
Expenditure of military 4.26b
 Communication and transportation
 Tel (main line in use) 4502200
 Cell/Mobile 5022900
 Internet Users 7.5
 Airport (91/43) 134

Pakistan, an impoverished and underdeveloped country, has suffered from

decades of internal political disputes, low levels of foreign investment, and a costly,
ongoing confrontation with neighboring India. However, IMF-approved government
policies, bolstered by generous foreign assistance and renewed access to global markets

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since 2001, have generated solid macroeconomic recovery the last four years (From
Crisis to Growth- Pakistan’s Poverty Reduction Strategy, 2006).
Although progress on more politically sensitive reforms has slowed, the government has
made substantial macroeconomic reforms since 2000. For example, in the budget for
fiscal year 2006, 2Islamabad did not impose taxes on the agriculture or real estate sectors,
despite Pakistan's chronically low tax-to-GDP ratio. While long-term prospects remain
uncertain, given Pakistan's low level of development, medium-term prospects for job
creation and poverty reduction are the best in more than a decade.
GDP growth, spurred by double-digit gains in industrial production over the past year,
has become less dependent on agriculture, and remained above 7% in 2004 and 2005.
Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005.
The World Bank and Asian Development Bank announced that they would each provide
the US $1 billion in aid to help Pakistan rebuild areas hit by the October 2005 earthquake
in Kashmir.
Foreign exchange reserves continued to reach new levels in 2005, supported by steady
worker remittances. In the near term, growth probably cannot be sustained at the 7%
level; however, massive international aid, increased government spending, lower taxes,
and pay increases for government workers will help Pakistan maintain strong GDP
growth over the longer term.

Cultural Customs
The core of culture is friendship, honor, religion and traditional hospitality.
Family, friends, and connections are very important on all levels in Pakistan.
Most people are Muslim and practice the Islam religion. Like any other countries’
Muslims, they are warm, emotional, and quick to explode. Muslims follow the doctrines
of the Koran, which forbids alcohol and the flesh of scavenger animals (i.e. pork), birds
and fish (i.e. shellfish). It also discourages use of caffeine and nicotine, although neither
are forbidden; in fact, they tend to be consumed in great quantity in Arabic and Middle
Eastern countries. The foreigners must be aware of the following religious and cultural
sensitivities when they develop the relationship with Pakistanis.

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 Kissing on the cheeks is common among men. However, any public display of
intimacy between men and women is strictly forbidden by the religious code. Pakistanis
are a very fashion conscious nation. Fifty percent of men and ninety-five percent of the
Pakistani women wear their national dress. The men wear baggy pants that get narrow at
the ankles. They are called shalwar. They also wear long shirts that hang down to their
knees, called kameez. Woman wears scarves on their heads called dupattas. When
dressing casual, short-sleeved shirts and long pants are preferred for men; shorts are
acceptable only when exercising. Women must keep their upper arms, chest, back, and
legs covered at all times. Women should wear long pants when exercising.
In big cities, they wear western style clothes. Men are generally expected to wear a suit
and tie for business, although the jacket may be removed in the summer. Women should
wear conservative dresses or pantsuits. Pakistan is a male-dominated society, and women
play little or no role in business or entertainment. It is impolite to inquire about women.

Negotiation, Decision making, and Ethical Issue

In order to develop relationships with Pakistanis business partners, foreigners
should know how to establish social ties in Pakistan. Hosting a meal at a nice restaurant
is always a good business practice. A fine dinner is a wonderful way to give a gift to
Pakistanis hosts, to show your guests you appreciate the business relationship you have
with them, and an opportunity to build connection.
Initial meetings are only for the purpose of getting acquainted. The greeting is “Asalam
Aleikum” (Peace be with you), followed by a firm handshake and then, for courtesy and
to pay homage to the host (you don’t necessarily have to), briefly place your right hand
over your heart. It is best to take a few minutes initially to engage in pleasantries about
each other's country, rather than going straight to business. Also, people can say “Haai!”
when they meet with Punjabis. That is Punjabi for, "Hi! Preparing for a business meeting
requires a working knowledge of the information to be discussed or presented, careful
attention to all details on the printed material to be distributed, and perhaps a gift. The
gift is a social gesture that may be expected in Pakistan. It could not be considered a bribe
in their business culture. It is very important in Pakistan to only use your right hand, or
both hands, to offer or accept a gift.

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Pakistanis managers have long traditions of consultative decision making, supported by
the religious beliefs. However, such consultation occurs more on a person-to-person basis
than in group meeting. Although business in Pakistan trends to be transacted in a highly
personalized manner, the final decisions are made by the top leaders who feel that they
must impose their will for the company to be successful.
Pakistan is a resource-rich country, and has strong human resources. Pakistan has
abundant land and natural resources that include extensive agricultural land crop
production, mineral reserves (coal, crude oil, natural gas, copper, iron ore, gypsum, etc.)
fisheries and livestock production. English is an official language, and is widely used in
government, the officer ranks of the military, and in many institutions of higher learning.
An English speaking work force, cost-effective managers and technical workers are good
advantages to do business in Pakistan. It has large and growing domestic market.
Pakistan has 165 million consumers with growing incomes and a growing middle-class
moving to sophisticated consumption habits. The population is estimated to grow to over
325 million by 2050 making it the third most populous country in the world.
Therefore, it is a good opportunity to introduce new products and expand the
market shares. Pakistan also has well-established legal systems and infrastructure. That
will allow doing business more effectively.
Pakistan is a strategic location as a regional hub. Pakistan is a principal gateway to the
Central Asia Republics and has strong and long-standing links with the Middle East and
South Asia. Pakistan has on average been among the faster growing economies in the
developing world, and has great potential for long term investment. Pakistan has
incentives for foreign investors.
Pakistan has the most liberal investment policy in the South Asia region. New incentives
and further liberalization measures include:
Reducing minimum foreign equity from US$ 0.5 million to US$ 0.3 million, Zero import
duties on capital goods, plant and machinery and equipment not mad locally. Zero import
duties on raw materials used in the production of exports and successful in Pakistan.