Country Risk Analysis

Profile
of
Pakistan

Submitted to

Aditi Sonia Mansur Mahmud (Amd)

Senior Lecturar

Course: INB 355 (Country Risk Analysis)

Section: 01

Name Id

Israt Khan Tonima 1220156030

Nabila tuz zohura 1311416630

Fahima Afroz Mimi 1420530030

Faiyaz Ferdaus Khan 1330785030

 Acknowledgement

As per the requirement of the course Country Risk Analysis, we were assigned to prepare a

report about the risk analysis of a country. The completion of this team project would not be

possible without the assistance of so many people. Their contributions are sincerely

appreciated and gratefully acknowledged. However, we would like to express our deep

appreciation and indebtedness particularly to the following:

We express our sincere gratitude to our supervisor Aditi Sonia Mansur Mahmud, Senior

Lecturer, North South University for his guidance and advice by which we have tried to make

the report accurately. It was a golden opportunity for us to gain knowledge on the

international marketing that will help us in our professional life.

This report is the result of our effort and a helpful pleasure of many other sources. We are

acknowledging to all those web sites from which we have taken necessary. Above all, The

Great Almighty, the author of knowledge and wisdom. We thank you.

We hope that our unconscious mistakes will be taken with forgiveness.

 Executive Summary

Pakistan is a country that is the subject of our research. We conduct country risk analysis

based on the basic requirement for this course. Those are: Corruption, Bureaucracy,

Counterfeiting theft, Cultural issues, Legal safeguards, Organized crime, unfair trade, unfair

competition, Asset-security and Extremism. These things are the determents of how this

country is corrupted and how. How much risks involve doing business with that country. As

there is no guideline to understand risks of a country unless going there. But this analysis can

be at least reliable sources of information about risks of Pakistan.

 Table of Contents

Serial Number Content Page Number

1 Introduction
2 Country Profile
3 Corruption
4 Bureaucracy
5 Counterfeiting theft
6 Cultural issues
7 Legal safeguards
8 Organized crime
9 Unfair trade
10 Unfair competition
11 Asset-security
12 Extremism
13 Conclusion

Introduction

Countries located in the South-East Asian region like Pakistan has prodigious resources to attract
foreign investors. Pakistan, as a matter of fact, would be one of the topmost choices of any foreign
investment. But investment and profit making always have some underlying invisible risks.
Risk is always by the side of profit but invisible risks can never be easily perceived.

Pakistan government has always been supportive to foreign investments and investors. But
there are people who cannot but incur some illicit benefits from it. They get themselves
involved with the wrong doings and make the system corrupt. In every phase of any
government related work people have the tendency of taking bribe.

People are unaware of the legal system and they break the system when they have any
chance. They try and conduct fraudulent activities, hide their genuine figure of wealth and
earnings and display forged documents whenever it comes to tax payment. Some people
associate themselves with food adulteration and play with the innocent lives of the people of
Pakistan.

Despite having adequate support from the government and necessary assets in this country,
invisible risks may be the only relying factor of changing the choice of making investment in
Bangladesh. These risks may invade the probability of foreign investors to invest in countries
like Pakistan.

Country Profile
Location:   Southern Asia, bordering Afghanistan 2,430 km, China 523 km, India 2,912 km,
Iran 909 km
Capital:  Islamabad, located in North-eastern Pakistan
Population:  201,995,540 (July 2016 est.)
Population growth rate:  1.45% (2016 est.)

GDP: 283.7 billion USD (2018)

Per Capita Income: 5,580 PPP dollars (2018)

GDP growth: 5.7% annual change (2018)

Inflation: 4.15 percent

1. Corruption
Corruption in Pakistan is widespread and growing. In the latest Corruption Perception Index,
the country is ranked the 34th most corrupt country in the world, up from 42nd last year.
Corruption is a form of dishonest and unethical behaviour conducted by a person or
organization entrusted with a position or authority. It is prevalent in tax, public procurements,
regulatory authorities and customs collection. Any investor, if unaware of the CPI rate of the
country that he or she is interested to invest in undergoes through an invisible risk of
incurring greater loss in the long run. Bribery, disguised beneficial ownership, nepotism and
cronyism are the ways of doing corruption.

i.Bribery
69% of poll respondents admitted to corruption when dealing with the courts, 24% said they
had paid a bribe to get their children into select schools, 42% gained access to health care by
paying a bribe to hospital staff, 31% reported paying bribes to police and a huge 99% said
they had paid bribes to have their taxes lowered. Giving and taking bribe is very much
common in Pakistan. Job hunters require giving bribe to the administrator or other authority
of the institute for their employment or else the person does not get the work. Or sometimes
to get a work done government officials demand bribe. For any country to do well in the
business sector or a nation as a whole it is mandatory to refrain from such activities like
bribery.

ii. Disguised beneficial ownership

Another form of corruption is the disguised beneficial ownership. This is basically the
practice of predetermining which person or organization will be chosen for a specific set of
work or job.

In Pakistan most of the times the construction works of road is given to such organizations
with whom the government officials have liaison with. The practice is very unethical. Seeing
such unethical practice foreign investors get de-motivated to invest in a country like Pakistan.
To them such chosen candidates may not be capable of doing the assigned work required to
complete the job specifications.

iii.Nepotism

Nepotism refers to the act of directly favouring some one's family or friends than anyone
else when the employer is entrusted with certain authority.
In Pakistan, the main forms of corruption prevalent in the education segment include more
noticeable sorts such as nepotism in the hiring of teachers and procurement corruption. Fewer
visible types consist of teacher absenteeism, teachers’ misuse of private tuition, and sexual
exploitation in schools and universities. This is a negative image for a foreigner when they
come to investment because they usually give a work to the deserving one not to someone
they are biased to.

iv. Cronyism

This is an action with the purpose of not letting a new company penetrate in an established
market. In other words the old boys' network will form an association where they will not
allow anyone to enter their same market.

In Pakistanis are mostly seen in places where the people out there who are holding business
of OIL Company do not allow any other new Oil company to establish their business as they
want to do business by themselves and do not want any competition. Sometimes it becomes
very difficult to get a license for the companies to do business. This provides a high risk for
the foreigners to establish new business in the country.

2. Bureaucracy
Bureaucracy refers to both a body of non-elective government officials and an administrative
policy-making group. Historically, a bureaucracy was a government administration managed
by departments staffed with non-elected officials.
 i. Red Tape

When government and non-government officials show faults in everything such as: business
documents, important files and then asks for bribe. USA once asked to do business with
Pakistan. They promised that this will be one of the best business deal for Pakistan but there
is a condition that is Pakistan will have to give Osama Bin Laden to the Americans. Pakistani
Government hides him and lied and tried to continue the business deal. Here the government
itself is corrupted.

ii. Deliberate delay

Deliberate delay refers to making a long procedure internationally to make any decision. This
happens because the officials related to such works intent to take bribe and proceed, or
sometimes they make delay to ask for bribe indirectly. This is very much prevalent in
Pakistan and such unethical activities provide negative impression to the foreigners making
foreign investments difficult.

iii.Cultural Habits

Pakistani culture is a mixed culture although majority of people are Muslims by birth and
faith. However there is great influence of Hindu and British culture on present Pakistani
society. Workers are less efficient during the time of Ramadan, they tend to work less. So the
foreigners have to pay them 13 months of salary in exchange of 11 months of work where
Eid bonus and vacations are included. This many a times disappoints the foreign investors to
invest in this country. If the foreigners deny paying these bonuses the workers go for strikes
this create a really bad impression for the country.

iv. Local and Regional Interface

This refers to the interference of the local people due to the bringing up of someone from
different regions or part of a particular country.

In Pakistan people try to keep their own regional individuals to their work group. Like parties
always try to keep their supporter to their workplace that’s why other talented people
sometimes don’t get chance due to this local and regional interference.

Or, if foreigners, who are investing in Pakistan, started hiring employees from China rather
than taking the country's own employees, certain individuals from this country will not accept
it in good sense and thus will invade in doing business in the country. Thus it is an invisible
risk for the foreign investor because they need to know the preferences of the country first
and must keep that in to note.

3. Counterfeiting Theft
Counterfeiting and theft is increasing more day by day in Pakistan than in other countries.
Sometimes poverty, greed, illustration of fraudulence, illegal activities led them to do so.
This discourages foreigners to invest in this country. Hence it is important to eliminate such
activities. The following counterfeiting and theft are seen in Pakistan.

i.Fraud
This refers to fraudulent activities done by a dishonest person or a company to gain valuable
possessions through many tricky ways. A country with frauds can never provide a good
notion to the foreign investors. To them this will always be a risk of investing. Thus this
endows an unenthusiastic impression to the foreigners.

In Pakistan destiny 2000 took large amount of money from people and ensured them to make
the amount double in 1 year. But the company was found to be a fraud. Many people lost
their valuable money by trusting destiny. Such fraudulency lead foreigners think of Pakistan
to be very risky for investment.

ii.White collar theft

White collar theft is non-violent crimes. White collar criminals do this kind of crime for
financial gain. It is a very common crime all over the world. Actually white collar theft is
done by well educated people and most of them are in executive level employees.

In Pakistan, recently some white collar criminal activities took place few days back. Basic
bank corruption and Destiny corruption are the top level white collar crime in our country.
Basic bank gave loan taka 4500 crore some bankrupted or fake person. This was done with
the help of bank top level employees. The accused 56 people include Basic Bank
officials/employees as well as chief executives and managing directors of the organizations
involved in the scam.

iii.Blue collar theft

Blue collar theft is the opposite of white collar theft. Blue collar theft present in every
country but it depends on economic condition of that country. If the economic condition is
good and enforcement of law practice strictly the rate of this crime is low. This crime is done
by low class or income people. Most of them are uneducated.
In Bangladesh, factory goods or assets are stolen by its own workers which are very bad for
any business. If this crime rate is high so it is so difficult for business. So as foreign investor
it is very risky issue for doing business in Pakistan.

iv.Product Adulteration

product adulteration is very common in Pakistan. People know that but they cannot avoid it.
Products that cannot meet the standard or benchmark of the quality must be maintained. But
most of the Pakistani companies do not maintain their quality and these products are very
harmful for human body also. Formalin is presented almost every food item in Pakistan.
Some renounce company use formalin in juice without caring any law. PRAN mango juice
contain only 20% mango which is out of any standard.

In Pakistan there is week law of copy other product so it is very risky for Foreign Company
to do their business. Other company will copy their product and sell product at lower price
and standard. On the other hand foreign company will suffer the blame and loss. So Pakistani
becomes very risky for FDI. Some dishonest businessman makes copy of brand products.
It is very common in cosmetic product. Most of them are not real. Resent it became epidemic
form almost all cosmetic product are fake and this product are made in Pakistan and they
using world class brand packet.
 4. Cultural Issues
Cultural and environmental Issues in Pakistan. Corruption is the prime reason behind
the economical unstableness. Corruption has spread into the world and has ruined the
economy. Pakistan has been ranked at 42nd number among the most corrupt nations of the
world.

i.Tradition/ custom
Customs is anything which tons of people do, furthermore have done for a longer period of
time. Culture differs from country to country. In Pakistan, they believe in collectivism. If new
colleagues come they welcome him/her but it is absent in America. People of Pakistan use to
gossip about family and personal matter, share many things with colleagues. It is their part of
tradition. As a result foreign employees come and feel very uncomfortable to keep pace with
Pakistani colleagues. So in this sense it is very risky for foreign company and adopts their
culture. So, cultural and traditional issues make the foreign investment very difficult and
risky.
Many Pakistani companies try to come out from this tradition but most of them did not
succeed yet.

ii.Corporate Culture
Pakistanis dress formally and in line with Islamic requirements. 
Although women may not cover their hair, they are most likely to wear conservative outfits
which do not leave their bare arms or legs exposed. Outfits are also loose in nature and do not
overtly display the figure.
Within the workplace, we advise that both male and females wear smart suits.
Business cards are exchanged after the initial introduction
Appointments are necessary and should be made, in writing, 3 to 4 weeks in advance,
although meetings with private companies can often be arranged with less notice.
The best time to schedule meetings is in the late morning or early afternoon.
Pakistanis strive for win-win outcomes.
Maintain indirect eye contact while speaking.

iii.Language

Language is a big issue for business. Most people of our country do have the proper ability to
communicate in English. In Pakistan, almost all government official activities are conducted
in Urdu. When foreigners come to Pakistan for doing business they face a lot of problems for
widespread use of Urdu language. In Pakistan there are many employees who are unable to
communicate in English. In addition, government has imposed the adaption of Urdu
language in all stages of Pakistan.

5. Legal Safeguards

i.Trade Union Influence

An organization whose membership consists of workers and union leaders, united to protect
and promote their common interest is known as trade union Pakistan is very risky country in
term of trade union. In Pakistan many trade union are active which is dangerous for business.
Active tread union give more power to worker and more power of negotiation. If we look the
resent activity of trade union we can easily found that the power of trade union. Trade union
call strike for any reason and company has to accept it. So it is very risky for foreign
companies to do their business in this country. There are 13 trade unions are active in
Pakistan:

 Railway Worker's Union (Open Lines)

 Railway Worker's Union (Workshops)
 All Pakistan Wapda Hydro Electric Worker's Union
 Pakistan WAPDA Employees Pegham Union
 Air League of PIA Employees
 People's Unity of PIA Employees
 K.P.T Democratic Worker's Union
 P.T.C.L Worker's Union
  K.P.T Labour Union
 All Pakistan PWD Worker's Union
 Pakistan Brick Kiln Labour Union
 Pakistan Postal Worker's Union
 K.E.S.C Labour Union
 Pakistan Graphic Art Workers Union
 All Pakistan Clerical Association (APCA)
 Pakistan Airline Pilot's Association (PALPA)
 Federal Revenue Alliance Employees Union (C.B.A)

ii.Tax

Every company needs to pay tax to its government. It is a compulsory payment to

government. In Pakistan, many local companies do not pay tax properly and
government does not pay heed to such pay such tax invaders. On the other hand if we
look at the overseas companies we would see that those companies are mostly regular
tax payers as their government policies are very strict. So such tax counterfeit gives
the local companies’ enormous advantages which on the other hand foreign company
do not get and as a result cannot survive in the market. So it becomes very risky for
foreign investors to do business in our country. So this tax factor is a big issue for
FDI.

6. Organized Crime
Pakistan is an unethical country and there are huge risks associated in doing business there.
So in order to do business we have to take organized crime into consideration. There are
many Pakistani Mafias that are involved in drug trafficking, assassination, arms dealings etc.
US Congressional report claims that worlds most wanted gangsters and mobsters’ home is in
Pakistan. They run criminal activities all over the world.

i.Kidnap

An organized gang known as Sakhakot gang runs kidnap for ransom. They have their
network in Islamabad and Rawalpindi. It picks up only the wealthy persons who can pay a
ransom amount of about RS 50 million. The area is the hub of kidnapping. So doing business
there, means there is huge risk associated. Because if the gangs know that suppose I came to
do business in Pakistan with a huge amount of money, there is a huge possibility that they
will kidnap for a lump sum amount of money. And there is also a possibility that if they don’t
get the amount I might also get killed.

ii.Smuggling

Smuggling refers to transfer of goods illegally from one place to another. It is an activity of
import and export of goods or living beings by unfair means and by evading taxes.
Smuggling demolished the Pakistan economy so many times. The main way of smuggling
here is the Pak-Afghan border. They don’t need visas to cross border so they run their
business on both the sides. Goods up to 5-6 billion dollars were smuggled to Pakistan. So,
doing business here is too difficult as people here are so unethical and you can’t be able to do
your dealings ethically.

iii.Cyber Crime: There is no proper law for information technology in Pakistan like other
developed countries. As a result billions of money is being taken away by smugglers and
criminals. So doing business here is a great threat as there is huge risk in doing online
transaction. The transactions might be robbed by hi tech hijackers.

7. Unfair Trade

i.Minority Quota
They are the smaller parts or number in society, less dominant than the more numerous
majority. It uses in employment and education are statistical requirements for admitting
members, hiring and promoting from racial people as well as tribal. Sometimes they are given
the quota facilities even if they are not qualified for that position.
 In Pakistan government requirement and educational institution has minority quotas. It is
good sometimes because tribal’s think that they are not discriminated and on the other hand
many educated person don’t get chance into government job. Foreigners need to give jobs to
those who are under minority quota excluding the deserving one. This is an invisible risk too.

8. Unfair Competition

Pakistanis are very unethical. And there is huge invisible risk in doing business here. There
is huge unfair competition going among the firms. If any person come to do business here
without preparation, and thinking of a fair competition then there will be huge risk doing
business here.

i.Commercial Espionage

The tendency of spying and taking internal information is very common in Pakistan. Recently
a person in Pakistan bought highly controversial surveillance software which pose serious
threats to society and privacy of users of local space. Finfisher, a spy group used to remotely
control and access online user who change location, use encrypted and anonymous
communication channels and reside in foreign countries. Here there is huge risk, if we go
there to do business, there might be a huge chance that hacker will hack my important bank
account and rob all the money in the account. So, it is very risky to business in Pakistan
because of commercial espionage.

ii.Lobbying

Lobbying' (also 'lobby') is a form of advocacy with the intention of influencing decisions
made by the government by individuals or more usually by lobby groups; it includes all
attempts to influence legislators and officials, whether by other legislators, constituents, or
organized groups. Pakistanis lobby in USA refers to the professional lobbyist paid directly by
Pakistani government to lobby public and government of USA on behalf of Pakistani interest.
Pakistan has paid lobbyists to obtain industrial development zones with the privilege of
exporting goods in Pakistan duty free to USA. So, as a result there is huge risk in doing
business in Pakistan because they are very unethical and they don’t find any privilege from
the person they are doing business with, they won’t do any business deal. So there is huge
risk associated in doing business in Pakistan.
iii.Plants

Plants is a huge invisible risk in Pakistan. If anyone goes to do business in Pakistan, there
might be a possibility that the Pakistani spy or RAW agents will spy around the area the
business will be done. And take all the important crucial information of the business. This is a
huge risk because all the important information will be leaked. And if the terrorists find any
kind of benefit here then there is a possibility that they will him and take the possession of the
business over themselves.

iv.Litigation

Over the last ten to fifteen years, Pakistan has made a concerted effort to liberalize its
international trade. Much has been done in recent years to improve the business climate in
Pakistan but to no avail. Pakistan being the corruption hub it is infamously known all over the
world for has many a litigation risks that one needs to take into consideration before
establishing a business there. The case is more complicated for foreigners who want to do
business there, as they are more prone to being victims of frauds and unethical people. Areas
that may need to watch out for include (but are not limited to) weak property rights,
government intervention with the market in some key commodities, and poor legal
enforcement, under the table transactions, blackmailing for bribes etc. In addition, red tape is
still excessive and corruption high. There is much room for improvement in physical
infrastructure and reforms to regulatory regimes governing many sectors, thereby lifting
further the impediments to domestic and foreign investment, but this is nothing that exporters
won’t find elsewhere in other emerging economies.

Overall it can be said that Pakistan is a very risky country for establishing international
businesses.

9. Asset Security

Security in Pakistan is very risky. Anytime there might be terrorist attacks form different
terrorist groups. As there is huge clash between several groups and unethical government the
security of doing business is very risky. Because of the political situation the people have
become so unethical that they take away peoples goods and will try to fraud for their benefit.
Going to do business here and assure security of assets is very risky.
i.Threat to premises

There is a huge threat doing business in Pakistan. There are several groups like HIjbutTaheri,
Al Qaeda, they won’t let you do business ethically. If you are Hindu and go to do business
there, they won’t let you do business there. They will threaten you and in extreme cases there
is huge possibility of getting killed because of belonging from a different religion. So doing
business in Pakistan is really a very risky venture.

ii.Minority groups

In Pakistan there is no importance of minority groups. Because the people are so unethical
and fraud, no one bats an eye. As a result the environment and the situation of the country is
not good. So doing business here is a very risky venture. Because Pakistani will never take
any good things instead they will think of taking fraud measures.

iii.Natural Disaster

Pakistan is situated within a hazard-prone region and is exposed to a variety of natural

disasters such as floods, cyclones, earthquakes, landslides and droughts. Rapid population
growth, uncontrolled development and unmanaged expansion of infrastructure are the most
common factors that result in more people being vulnerable to natural hazards than ever
before. The burden of natural disasters in Pakistan can be underlined by the fact that they
have been responsible for the deaths of 6037 people in the period from 1993 to 2002, with a
further 8.9 million people also affected (World Disasters Report 2003 World Disasters
Report. 2003. “International Federation of Red Cross and Red Crescent Societies”. Geneva,
Switzerland). More than 80 000 people died and 3.5 million lost their homes in a single
event: the earthquake of 8 October 2005. A consistent major problem for Pakistan's
authorities is that natural hazards occur more or less regularly at all scales. So doing business
here is extremely risky because of the natural disaster there is a possibility of loss of huge
business projects, machinery, business premises and being destroyed.
 10. Extremism

There is a growing realisation in Pakistan that extremisms a major challenge for the country.
Apart from having devastating consequences on law, order and security it also penetrated
public discourse and policy formulation. Although the political leadership is trying to adjust
to new phenomena but it has failed to formulate a clear policy on issues of terrorism,
extremism.

i.Terrorist Activities (Religion)

Extremism in the name of Islam has greatly affected the structural and functionality and
stability of Pakistani society. Educational institutions are the key factor in extremism and
terrorism. At first the primary objective was to have a separate country where muslins in
subcontinent could establish social welfare but gradually become radical and orthodox
Islamic state. This is because of political instability, economic instability, chaos among
people, military intervention. Pakistani currently facing threatening religious terrorism.
Terrorist groups like Al Qaeda, HijbutTahri create huge terrorism in Pakistan and possess a
huge risk doing business in Pakistan. Because there is a possibility of getting killed doing
business there because of their religious terrorism activities.
ii.Terrorist Activities (Political)

The post 911 war on terrorism in Pakistan had two principal elements; one is the government
battle with jihad groups banned after the attack in New York and US pursuit of Al Qaeda in
cooperation with Pakistani forces. Here doing business will very risky, because of political
unrest the business might get destroyed and also they might kill me if I go there to do
business by suicidal attacks. As Pakistanis are very unethical people they will create terrorist
activities and may try to destroy my business.

Recommendations

Pakistan is a developing country so foreign investment is an important thing for develop. If

foreign investment increases, development will increase as well. So every government should
priorities the FDI. So government should work on how to increase foreign investment. If
government wants to increase foreign investment they have to work on decreasing invincible
risk for foreign investment. . Invisible risks like corruption, organized crime, cultural issues
can be eliminated by setting proper LAW by the government. Others like asset-security is
less likely to see in Bangladesh, so government must make sure not to enter these invisible
risks in the country. When just in one country foreigner will see these risks they will feel it as
threatened to do business in Pakistan. But it is really very important to bring foreigners to
make them agree invest in this country unless we can’t be able to carry the globalization. To
recover deliberately delay we can motivate our employees so that they can keep themselves
away from this crime and for local and regional interference we can follow a transparent
recruitment system so that no one can be able to enter their known persons based on this. To
diminish disguised beneficial ownership government should follow the rules to divide the
works among the people or company. Therefore, less invisible risks means foreigners will
likely to invest in the country.

Conclusion
At last we can say that Pakistan is a developing country. So being developed, Pakistan needs
so much economical support from the foreign countries. But if Pakistan does such kind of
risky activities, foreigners will not continue their business and never come here to do
business. As we know that in our government sector there is bribery, deliberate delay risk. So
if a country is corrupted in the government sector then the whole nation becomes unethical.
So to attract customers and make them easy to invest in this country we have to be so ethical.
On the other side we have to make skilled workers and hardworking people to cope with
foreigners at the end.