Brexit

Outline
• Introduction
• Issues and challenges
• Analysis
• Conclusion
• Recommendations
Introduction
 Introduction

• Britain and exit combined as - Brexit

• Indicating that Britain is leaving EU
• Just like Greek exit from the euro - Grexit
• A referendum was held on 23 June, 2016
• Campaign divided into leave and remain
• Leave won by 52% to 48%
 Introduction

• The referendum turnout was 71.8%

• More than 30 million people voted
• England voted for Brexit by 53.4% to 46.6%
• Wales with Leave 52.5% Remain 47.5%
• Scotland backed Remain by 62% to 38%
• Northern Ireland Remain by 55.8% to 44.2%
Introduction
 Introduction
• MOFA deliberated this issue within 4 days
• Presided over by the Advisor to the PM
• Attended by SA, Minister of Commerce etc
• Decisions;
– MOFA monitor legal/commercial implications
– MOC to analyze Pakistan’s exports to UK/EU
• Subsequently meeting was held in MOC
 Issues and Challenges
• Three parts
• EU
• UK
• Pakistan
 Issues and challenges-EU
• Demand for EU reforms or more exits
• Especilally bureaucracy related reforms
• How the other counties react, particularly
• Germany, France and possibly Netherlands
• The troubling economies will suffer more
• PIGS (Portugal, Italy, Greece, and Spain) etc.
 Issues and challenges - UK
• For Leave campaigners it was independence
• Getting rid of EU regulations
• Its funds being used in this organization
• Made UK less secure domestically
• Internationally less influential
• Boris Johnson and Nigel Farage pro-leave
 Issues and Challenges – Pakistan

1) Exports
2) Worker Remittances
3) Foreign Direct Investment
4) Grants/Aid
5) Social Impact and Law & Order
Issues and Challenges
 Issues and Challenges – Exports
• The EU is the most important trading bloc
• Accounting for 21.2 % of total exports
• GSP-Plus, awarded in 2013 by the EU
• Pakistan’s exports to the EU increased
• From $6.21 (b) (2013) to $7.54 (b) (2014).
 Issues and Challenges - WR
• UK contributes 20% of the total remittances
• The UK is the third largest source
• Behind KSA and the UAE 
• Indeed a significant market for Pakistan
• EU is merely 3% of the total remittances
• During transition period remittances may fall
 Issues and Challenges – FDI
• Share of FDI from UK is around 6 percent
• Decline in the economic activity may reduce
• Currently only focus of FDI is China
• It has increased from 21% in 2003 to 75%
• Too much dependence on one country is risky
• Foreign direct investment may rise
Issues and Challenges – Grants/Aid
• UK is a significant contributor in grants 60%+
• An amount of over $260 million and growing
• 18 billion pounds Britain is saving from EU
• A chunk of it could be spent on aid and grants
• Britain has allocated 0.7% of GNI for aid
• Aid to Pakistan may be affected adversely
 Issues and Challenges -
Social Impact and Law & Order
• Rifts created religiously and racially
• It may affect interfaith harmony
• Economic consequences such as;
 Sluggish economy,
 Week currency,
 Unemployment
• Fomenting Islamophobia and racism
 Analysis – Exports
• Two dimensional challenge for Pakistan
 Retaining GSP Plus in EU
 Negotiating a new one with UK
• There is a possibility of recession in UK
• Affecting bilateral trade and investment
• Its positive impact may be investment in Pak
 Analysis – WR
• Pakistan receives 20% percent of remittances
• Brexit may affect in two ways:
• Firstly depreciation, more Pounds less value
• Less expenditure less GDP Growth in Pakistan
• Secondly, in case of job loss, WR reduced
• Slightly higher current account deficit
 Analysis – FDI
• The UK has the third FDI inflows
• Behind China and the UAE
• Several multinationals are well-established
• Foreign portfolio investment would decline
• As the risk from these portfolios increases
• Brexit would have little impact on FDI
 Analysis – Grants/Aid
• UK one of Pakistan’s leading bilateral donors
• Supported social and economic sectors
• Grants would take a hit due to uncertainty
• Aid has an important qualitative value
• Could be lessened due to fragile economic
• Decrease will not be a good sign for Pakistan
 Analysis –
Social Impact and Law & Order
• Immigrants was one issue of Brexit
• UK quota of immigrants may shrink
• Extreme reactions creating law and order
• Hence visa issues, trading constraints, etc
• This will also hurt the exports, remittances
• Scholarships and the economy as a whole
 Conclusion

• It is concluded there may not be an immediate

severe fall-out on Pakistan, however, there’re
real vulnerabilities out there over a period of
time, particularly on the foreign inflows, in the
form of exports, grants, worker remittances,
FDIs, etc., which need to be plugged-in
through proactive policy decision making and
diplomatic actions.
 Recommendations - Exports
• Exporters to improve competitive advantage
• Broaden the export base beyond five sectors
• Carry out an in-depth analysis of exports
 Recommendations - WR
• Worker remittances be treated as industry
• Capture the opportunities across the world
• An aging population concern in countries
• The requisite skills be imparted to our workers
• Language should be focused such as English
• Compliance clearance screening process
 Recommendations - FDI
• The basket of FDI may be diversified beyond
China to EU and ME as putting all eggs in one
basket is risky.
 Recommendations – Grants/Aid

• For grants and aid we need to make sure that

at the diplomatic level and we shall engaged
ourselves with the UK authorities to ensure
non-impairment.
 Recommendation–
Social Impact and Law & Order
• We should remain in touch with our workers in
UK and EU through welfare attaché and keep
ourselves abreast of the changing
circumstances.