Final Report

Topic
Globalization and Liberalization
Subject
Pakistan Industry Analysis
Submitted to
Sir Zafarullah Siddiqui
Class
BBA-7B

Group Members

Syed Suheer Haider (01-111162-102)

Rameen Kamran (01-111171-078)
Zahran Minhas (01-111171-070)
Yawer Shafique (01-111171-125)
Anum Gul (01-111171-010)

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Contents
Globalization ................................................................................................................................................. 4
Globalization for Developing Countries .................................................................................................... 4
Benefits of Globalization ........................................................................................................................... 5
1. Access to New Cultures....................................................................................................................... 5
2. The Spread of Technology and Innovation .......................................................................................... 5
3. Lower Costs for Products .................................................................................................................... 5
4. Higher Standards of Living Across the Globe ....................................................................................... 5
5. Access to New Markets....................................................................................................................... 5
6. Access to New Talent ........................................................................................................................ 5
Challenges of Globalization....................................................................................................................... 6
1. International Recruiting ...................................................................................................................... 6
2. Managing Employee Immigration ....................................................................................................... 6
3. Payroll and Compliance Challenges ..................................................................................................... 6
4.Loss of Cultural Identity ..................................................................................................................... 6
5.Foreign Worker Exploitation .............................................................................................................. 6
How Globalization Changes Your Daily Businesses Operations................................................................ 7
1. Global Communication Challenges...................................................................................................... 7
2. International Employee Expectations .................................................................................................. 7
3. Supporting Foreign Customers............................................................................................................ 7
4. Increased Competition........................................................................................................................ 7
5. Marketing and Communication Changes ............................................................................................ 8
Pakistan's Experience with Globalization ................................................................................................. 8
Liberalization ................................................................................................................................................. 9
Advantages of Liberalization ................................................................................................................... 10
1. Di -licensing of Industries ................................................................................................................ 10
2. Increase in FDI ................................................................................................................................. 10
3. Increasing in Foreign Technology .................................................................................................... 10
4. Industrial Location ........................................................................................................................... 10
5. Faster growth and poverty reduction ............................................................................................. 10
Disadvantages of Liberalization .............................................................................................................. 10
1.Increase Dependency ....................................................................................................................... 10
2. Loss in domestic unit ....................................................................................................................... 10

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Trade Liberalization .................................................................................................................................... 11
Advantages of Trade Liberalization......................................................................................................... 11
1.Comparative advantage ................................................................................................................... 11
2.Lower prices ..................................................................................................................................... 11
3.Increased competition ..................................................................................................................... 11
4.Economies of scale ........................................................................................................................... 11
5.Inward investment ........................................................................................................................... 12
Disadvantages of Trade Liberalization .................................................................................................... 12
Structural unemployment ................................................................................................................... 12
Environmental cost ............................................................................................................................. 12
Infant-industry argument.................................................................................................................... 12
Pakistan’s trade liberalization experience .............................................................................................. 12
Impact of Globalization and Liberalization on Growth, Employment and Poverty ................................ 13
References .................................................................................................................................................. 14

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Globalization
Globalization is a process of interaction and integration among the people, companies, and
governments of different nations, a process driven by international trade and investment and
aided by information technology. This process has effects on the environment, on culture, on
political systems, on economic development and prosperity, and on human physical well-
being in societies around the world. Technology has been the other principal driver of
globalization. Advances in information technology, in particular, have dramatically transformed
economic life. Information technologies have given all sorts of individual economic actor’s
consumers, investors, businesses valuable new tools for identifying and pursuing economic
opportunities, including faster and more informed analyses of economic trends around the
world, easy transfers of assets, and collaboration with far-flung partners.

Globalization is deeply controversial, however. Proponents of globalization argue that it allows

poor countries and their citizens to develop economically and raise their standards of living,
while opponents of globalization claim that the creation of an unfettered international free
market has benefited multinational corporations in the Western world at the expense of local
enterprises, local cultures, and common people. Resistance to globalization has therefore taken
shape both at a popular and at a governmental level as people and governments try to manage
the flow of capital, labor, goods, and ideas that constitute the current wave of globalization.

Globalization for Developing Countries

Developing countries face special risks that globalization and market reforms will exacerbate
inequality, at least in the short run, and raise the political costs of inequality. During that
transition, more emphasis on minimizing and managing inequality would minimize the real risks
of a protectionist and populist backlash. Globalization creates greater opportunities for firms in
less industrialized countries to tap into more and larger markets around the world. Thus,
businesses located in developing countries have more access to capital flows, technology,
human capital, cheaper imports, and larger export markets.

Globalization allows businesses in less industrialized countries to become part of international

production networks and supply chains that are the main conduits of trade. Globalization gives
access to the world market to transitional countries. They need to adapt their production
capability, their prices, and their product quality to be competitive with the nations of the
developed countries. Globalization changed and continues to change China. This country is
becoming a major economic player in the global world. Globalization allocates the production
in the countries where it is the most efficient and less costly for the global world. Developed
countries become more concentrated on services and research and development. The best
example in the United States is Apple.

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Benefits of Globalization

Globalization impacts businesses in many different ways. But those who decide to take on
international expansion find several benefits, including:

1. Access to New Cultures

Globalization makes it easier than ever to access foreign culture, including food, movies, music,
and art. This free flow of people, goods, art, and information is the reason you can have Thai
food delivered to your apartment as you listen to your favorite UK-based artist or stream a
Bollywood movie.

2. The Spread of Technology and Innovation

Many countries around the world remain constantly connected, so knowledge and
technological advances travel quickly. Because knowledge also transfers so fast, this means that
scientific advances made in Asia can be at work in the United States in a matter of days.

3. Lower Costs for Products

Globalization allows companies to find lower-cost ways to produce their products. It also
increases global competition, which drives prices down and creates a larger variety of choices
for consumers. Lowered costs help people in both developing and already-developed countries
live better on less money.

4. Higher Standards of Living Across the Globe

Developing nations experience an improved standard of living, thanks to
globalization. According to the World Bank, extreme poverty decreased by 35% since 1990.
Further, the target of the first Millennium Development Goal was to cut the 1990 poverty rate
in half by 2015. This was achieved five years ahead of schedule, in 2010. Across the globe,
nearly 1.1 billion people have moved out of extreme poverty since that time.

5. Access to New Markets

Businesses gain a great deal from globalization, including new customers and diverse revenue
streams. Companies interested in these benefits look for flexible and innovative ways to grow
their business overseas. International Professional Employer Organizations (PEOs) make it
easier than ever to employ workers in other countries quickly and compliantly. This means that,
for many companies, there is no longer the need to establish a foreign entity to expand
overseas.

6. Access to New Talent

In addition to new markets, globalization allows companies to find new, specialized talent that
is not available in their current market. For example, globalization gives companies the
opportunity to explore tech talent in booming markets such as Berlin or Stockholm, rather than
Silicon Valley. Again, International PEO allows companies to compliantly employ workers
overseas, without having to establish a legal entity, making global hiring easier than ever.

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Challenges of Globalization
Some of the hurdle’s companies face when going global include:

1. International Recruiting
It’s not surprising that 30% of U.S. and UK tech leaders cited international recruiting as their
most common challenge. Recruiting across borders creates unknowns for HR teams. First,
companies create a plan for how they will interview and thoroughly vet candidates to make
sure they are qualified when thousands of miles separate them from headquarters. Next,
companies need to know the market’s demands for salaries and benefits to make competitive
offers. To ensure successful hires, HR teams must factor in challenges like time zones, cultural
differences, and language barriers to find a good fit for the company.

2. Managing Employee Immigration

Immigration challenges cause a lot of headaches internally, which is why 28% of U.S. and UK
tech leaders agreed it was one of their top challenges. Immigration laws change often, and in
some countries, it is extremely difficult to secure visas for employees that are foreign nationals.

3. Payroll and Compliance Challenges

Another common global expansion obstacle is managing overseas payroll and maintaining
compliance with changing employment and tax laws. This management task gets even more
difficult if you’re trying to manage operations in multiple markets.

4.Loss of Cultural Identity

While globalization has made foreign countries easier to access, it has also begun to meld
unique societies together. The success of certain cultures throughout the world caused other
countries to emulate them. But when cultures begin to lose their distinctive features, we lose
our global diversity.

5.Foreign Worker Exploitation

Lower costs do benefit many consumers, but it also creates tough competition that leads some
companies to search for cheap labor sources. Some western companies ship their production
overseas to countries like China and Malaysia, where lax regulations make it easier to exploit
workers.

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How Globalization Changes Your Daily Businesses Operations
Both the benefits and challenges of globalization change how a business operates in different
ways. When companies decide to go global, they must be ready and willing to change internal
processes. This helps to accommodate new markets and make their global workforce feel
comfortable and accepted at work.

Companies see many aspects of their businesses change once they enter the global
marketplace. For example, globalization makes the workforce more diverse. This diversity is an
overall positive change, but it creates some challenges, such as language barriers and
differences in cultural expectations.

Some operational changes companies should expect from globalization include:

1. Global Communication Challenges

Before starting to branch out from headquarters, firms have to put an established internal
communication plan in place since global employees likely work in a different time zone and
have a different native language. Software and other digital tools help smooth global
communication hurdles and allows teams to connect easily. Zoom, Slack, and Google all provide
valuable tools for companies trying to manage employees in multiple offices, countries, and
time zones.

2. International Employee Expectations

Foreign employees have different expectations when it comes to things like salary and benefits,
as well as how they manage their daily work schedules. Companies that want to take advantage
of globalization and hire foreign workers need to accommodate them as much as possible. HR
teams must also ensure their offers are competitive and on-par with local expectations during
the hiring process.

3. Supporting Foreign Customers

Similar to communication changes with employees, companies must also plan for how they run
customer service and support in new countries. Customers in the new market where you offer
your products or services might not speak your native language or be close to your time zone.

4. Increased Competition
International companies have to adjust more than internal operations. Going global opens up
new revenue streams and increases availability to talent. Because of these attractive benefits,
and the ease of going global due to services like International PEO, the global marketplace is

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competitive. As globalization becomes the norm, many companies often seek the same foreign
markets, which increases competition for businesses.

5. Marketing and Communication Changes

Just like hiring employees in different countries creates internal communication challenges,
marketing your products or services to a completely new audience creates obstacles for
companies. Businesses need to adjust their marketing strategies to communicate the benefits
of their product in a way that resonates with a foreign audience. You cannot assume that a
marketing campaign targeting an American audience attracts consumers in Europe, Asia, or any
other popular market, as the consumers there have very different wants and needs.

Pakistan's Experience with Globalization

Globalization has had serious impact on Pakistan’s economy, politics, society, law and religion.
Like many other developing countries, Pakistan is experiencing both positive and negative
effects of the globalization. Every Society has its own culture and way of life. It is established by
the group of people who live together and adhere to some principles in their society. Pakistan
has a rich and unique culture that has preserved established traditions throughout history.
Many cultural practices, food, monuments and shrines were inherited from the rule of Muslim
Mughal and Afghan Emperors.

The national dress of Pakistan is Shalwar Qameez, but cultural globalization is having impact on
the dressing of Men and Women. Wearing T-shirts, sunglasses, long shoes and jackets is not a
part of Pakistan’s culture. People are becoming more conscious about their dressing styles and
Fashion. Now, they see if a fashion is suitable for them or not. Women have become more
brand conscious. The trend of wearing western clothes like jeans and shirts is increasing in
women.

Pakistan has its own deep-rooted desi cuisine but as a result of globalization, fast food culture is
widespread in Pakistan. International Food Chains such as KFC, Mc Donald’s, Pizza Hut, Hardees
etc. can be easily located on the corners of streets, Airports, Malls, Shopping Centers, schools
and Gas stations. In Pakistan, first fast food chain was opened in 1997, that was KFC and just
after a year, Mc Donald’s opened in 1998. There is no looking back since then. Pakistani people
love to eat inter-continental and Chinese cuisines. Pakistani cuisine is also being recognized due
to globalized world. The variety of

Pakistani Music ranges from diverse provincial folk music and traditional styles such as Qawwali
and Ghazal Gayaki to modern forms fusing traditional and western music, such as
synchronization of Qawwali and western music by the world renowned Nusrat Fateh Ali Khan.
Various American, European, and Asian Television channels and films are available alongside
state owned PTV and other privately-owned channels. People have wide variety to choose,

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what they like to listen and watch. They have access to latest movie and music releases, making
it more competitive for the Pakistan’s Movie and Music industry.

Pakistan is facing challenges due to rise in competitive conditions, so the industry has to be
improved to compete with foreign competitors. Trade sector is lead to growth because trade
barriers are reduced by globalization. Manufacturing industry is growing now exports are more
in manufacturing industry. The communication technology revolution also brought life to the
economy of Pakistan. Now this sector is growing fast and taking part in economic development.
For winner of the process, Globalization becomes an integrating phenomenon, one that brings
together markets, ideas, individuals, goods and services and communication.

For the losers, it can be a marginalizing phenomenon. Just as the winners come closer to each
other they become more distant from losers. Pakistan is right now an example of hybrid society
as a result of globalization, trying to find its balance between Islamization and modernism.
Globalization has tremendously changed the dressing, cuisine, cultural values, purchasing
power and socio-economic system of Pakistan.

Liberalization
liberalization refers to a relaxation of government restrictions in the areas of social, political
and economic policies. In the context of economic policy, liberalization refers to lessening of
government regulations and restrictions for greater participation by private entities. It is a
process to removing controls systems in order to encourage economic development. The
economy is thrown open and the best goods and services compete in the market and the
consumer has a choice and monopolies disappear. ‘Liberalize’ means remove or loosen
restrictions on (something typically an economic or political system). Generally, Liberalization
(Liberalization) refers to removal or relaxation of restrictions imposed by the previous
government usually in areas of economic or social policy. In the area of social policy,
liberalization refers to the relaxation of laws for example, laws on homosexuality, drugs,
abortion, divorce etc. In the area of economic policy, liberalization can either be privatized or
be liberalized.

Liberalization is about:

 Encouraging growth of private sector.

 Simplification of policy, regulation, tax structure.
 Facilitating Foreign Direct Investment.
 Restructuring public sector for efficiencies.
 Providing incentives for exports and allowing more imports.
 Put emphasis on modernization of plants and equipment through liberalized imports of
capital goods and technology.
 Expose the Indian industry to competition by gradually reducing the import restrictions
and tariffs.
 Moving away from protection of small-scale industries.

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Advantages of Liberalization

1. Di -licensing of Industries
Di -licensing of industries means government removed the license in some industries. Removed
in the lengthy process of obtaining license it helps people to open business easily, further this
help economy to increase competition and nation’s performance.

2. Increase in FDI
Removing of this act, helps business to take investment from foreign investors which helps to
expand business. People of foreign country can invest without any permission or request from
government. In current, situation foreign investors can invest up-to 49% as company’s
ownership should remained with hands on Indian.

3. Increasing in Foreign Technology

This results effects to increase in import of foreign technology to use advance level of
technology so business can run effectively as well as efficiently.

4. Industrial Location
As removing in unwanted rules, now the company can set up industrial location where the
business can run effectively. As before it takes huge time to take permission from government
to set up industry in different location.

5. Faster growth and poverty reduction

Due to rise in export and import it also help to grow economy to grow fast and it also helps to
reduction in poverty.

Disadvantages of Liberalization

1.Increase Dependency
As results in increase in foreign trade, nation goes dependence in technology, Material etc. If
any breakdown happened it can cause loss to the industry or business.

2. Loss in domestic unit

As results in increase in foreign trade, nation goes dependence of material as it is very cheap
from foreign countries like china etc. It causes loss to domestic unit as nobody wants to buy
domestic products.

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Trade Liberalization

Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange
of goods between nations. These barriers include tariffs, such as duties and surcharges, and
nontariff barriers, such as licensing rules and quotas. Economists often view the easing or
eradication of these restrictions as steps to promote free trade.

Trade liberalisation involves:

 Reducing tariffs
 Reducing/eliminating quotas
 Reducing non-tariff barriers

Non-tariff barriers are factors that make trade difficult and expensive. For example, having
specific regulations on making goods can give an unfair advantage to domestic producers.
Harmonizing environmental and safety legislation makes it easier for international trade.

Advantages of Trade Liberalization

1.Comparative advantage
Trade liberalization allows countries to specialize in producing the goods and services where
they have a comparative advantage (produce at lowest opportunity cost). This enables a net
gain in economic welfare.

2.Lower prices
The removal of tariff barriers can lead to lower prices for consumers. E.g. removing food tariffs
in West would help reduce the global price of agricultural commodities. This would be
particularly a benefit for countries who are importers of food.

3.Increased competition
Trade liberalisation means firms will face greater competition from abroad. This should act as a
spur to increase efficiency and cut costs, or it may act as an incentive for an economy to shift
resources into new industries where they can maintain a competitive advantage. For example,
trade liberalisation has been a factor in encouraging the UK to concentrate less on
manufacturing and more on the service sector.

4.Economies of scale
Trade liberalisation enables greater specialisation. Economies concentrate on producing
particular goods. This can enable big efficiency savings from economies of scale.

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5.Inward investment
If a country liberalises its trade, it will make the country more attractive for inward investment.
For example, former Soviet countries who liberalise trade will attract foreign multinationals
who can produce and sell closer to these new emerging markets. Inward investment leads to
capital inflows but also helps the economy through diffusion of more technology, management
techniques and knowledge.

Disadvantages of Trade Liberalization

Structural unemployment
Trade liberalization often leads to a shift in the balance of an economy. Some industries grow,
some decline. Therefore, there may often be structural unemployment from certain industries
closing. Trade liberalization can often be painful in the short run, as some industries and some
workers suffer from the decline in uncompetitive firms. Though net economic welfare
improves, it can be difficult to compensate those workers who lose out to international
competition.

Environmental cost
Trade liberalization could lead to greater exploitation of the environment, e.g. greater
production of raw materials, trading toxic waste to countries with lower environmental laws.

Infant-industry argument
Trade liberalization may be damaging for developing economies who cannot compete against
free trade. The infant industry argument suggests that trade protection is justified to help
developing economies diversify and develop new industries. Most economies had a period of
trade protectionism. It is unfair to insist that developing economies cannot use some tariff
protectionism. Because of this argument, some argue that trade liberalisation often benefits
developed countries more than developing countries.

Pakistan’s trade liberalization experience

Pakistan has been one of the fastest growing economies in Asia for last five years. Economic
growth rates have risen from 1.8 per to average 6- 7 per cent a year. For Pakistan these rates
are not spectacular but a reversion to the average longer-term growth rate. One of the factors
contributing to Pakistan’s growth performance is Pakistan’s track record on trade liberalization
reforms. According to a World Bank study Pakistan’s recent reforms have been substantial. Its
trade regime is now one of the more open in South Asia. Using both partial equilibrium and the
general equilibrium impact of trade liberalization and the simulations for the future concludes
that, contrary to popular beliefs and perceptions, the process of trade liberalization in Pakistan
does not appear to have had a significant adverse impact on poverty and income inequality.

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These results indicate that trade liberalization has, if anything, reduced poverty and inequality
although only modestly so on balance. The main channels of transmission leading to this
outcome are growth, productivity, investment and price stability. Foreign direct investment
that has come into Pakistan does appear to increase income inequality as it is focused on
sectors that use highly skill labor- and capital-intensive technologies and does not use much of
the abundant factor of production, labor. Despite pressure and protests from rent seeking
businesses, the risks of reversal of these reforms are low as the main political parties are not
only committed to trade liberalization but have actually been
behind the implementation of these reforms in the decade of 1990s.

Impact of Globalization and Liberalization on Growth, Employment and

Poverty

While globalization is viewed as a key to future economic development, it is also argued that it
increases poverty, threatens employment and living standards of the poor. Like many other
developing countries, Pakistan also attempted to integrate its economy in the global economy
through liberalizing its investment and trade regime within the framework of the IMF and the
World Bank. A review of literature indicates that although a number of cross-country studies
have shown a positive association between trade openness and economic growth, the recent
work suggests that openness has no robust link with long-term growth. Thus, positive effects of
liberalization on growth remain controversial. Evidence shows that despite numerous highly
attractive incentives offered to foreign investors, Pakistan’s performance in attracting the
foreign investment has been poor. Similarly, despite the intensive trade liberalization, the trade
performance has been dismal.

The stabilization initially achieved proved to be short-lived due to the slippages in reform
process occurred in the form of spread of tax exemption and concession leading to
implementation of further stabilization measures. The repeated attempts to stabilize the
economy together with liberalization and persistent devaluation of domestic currency pushed
the economy in a vicious circle. The lowering of tariff rates led to a considerable loss of revenue
and resulted in stagnant tax GDP ratio, resulting in reduction in development expenditure to
reduce the budget deficit. The government sought to restrain aggregate demand not only by
granting wage increases below the inflation rate but also by freezing employment in the public
sector. These developments together with liberalization led to lower GDP growth, increased
indebtedness, higher unemployment and thus higher poverty incidence during the period of
liberalization.
This adverse outcome is reflection of the fact that the country was asked by the IMF to cut its
tariff rates swiftly before adopting to a new system of domestic taxation. The structural
adjustment programs designed by the IMF/World Bank take the poverty as a residual issue.
Hence, earlier anti-poverty programs in Pakistan reached a small fraction of the poor, partly
because their total size was limited and partly because of poor targeting. Hostility of
globalization process suggests a broader approach and allocation of more funds for poverty

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reduction. For future growth and poverty reduction strategies, the issue of achieving higher
growth must be combined with overall pattern of social progress and distribution.

References
http://www.commerce.gov.pk/wp-content/uploads/2019/11/National-Tariff-Policy-2019-
24.pdf
https://medium.com/@gautamkhurana0000/meaning-advantage-and-disadvantage-of-
liberalization-explained-briefly-e97b44aad02a
https://www.theglobaleconomy.com/Pakistan/exports_dollars/
https://www.slideshare.net/idspak/15-globalization-andpoverty
https://www.theglobaleconomy.com/Pakistan/kof_econ_glob/
https://www.tandfonline.com/doi/full/10.1080/0003684042000206951?scroll=top&needAcces
s=true
https://tribune.com.pk/story/1086632/pakistan-and-globalisation/
https://www.ukessays.com/essays/economics/globalization-and-its-impact-on-pakistan-
economy-economics-essay.php
https://voxeu.org/article/how-globalisation-affected-manufacturing-around-world
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.500.3862&rep=rep1&type=pdf
https://www.researchgate.net/publication/255631231_Impact_of_Globalization_On_Pakistan'
s_Economy

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