ISLAMABAD: A leading US news paper, Wall Street Journal’s report said that Pakistan’s Middle Class Soared as stability returned.
The report said that consumers spending rockets as poverty shrunk, terrorism dropped and democracy strengthened in the country. Pakistan has developed a burgeoning middle class in recent years that is fueling economic growth and bolstering a fragile democracy.
For companies like the Swiss food maker Nestlé SA, such hungry consumers signal a sea-change. “Pakistan is entering the hot zone,” said Bruno Olierhoek, Nestle’s CEO for Pakistan, saying the country appears to be at a tipping point of exploding demand. Nestle’s sales in Pakistan have doubled in the past five years to $1 billion.
Although often overshadowed by giant neighbors India and China, Pakistan is the sixth most-populated country, with 200 million people. And now, major progress in the country’s security, economic and political environments have helped create the stability for a thriving middle class.
An unpublished study last year that measured living standards, from Pakistani market research firm Aftab Associates, found that 38% of the country is middle class, while a further 4% is upper class.
Official figures show that the proportion of households that own a motorcycle soared to 34% in 2014 from 4% in 1991, and a washing machine to 47% from 13% over that same period. These trends are also attracting international business.
In December, Royal FrieslandCampina NV, a Dutch dairy company, paid $461 million to buy control of Engro Foods, a Pakistani packaged milk producer in a country where most milk is sold unpasteurized from open milk containers.
“What we see is consumer spending is rising and a middle class coming up,” said Hans Laarakker, Engro’s new chief executive.
Late last year, China’s Shanghai Electric Power agreed to pay $1.8 billion for a majority of Karachi’s electric supply company; Turkish electrical appliance maker Arçelik paid $258 million for a Pakistani appliance maker, Dawlance, saying Pakistan has an “increasingly prosperous working and middle class”; and French car maker Renault SA said it was seeking to set up a plant in Pakistan.
Meanwhile, during the past three years, deaths from terrorist attacks have fallen by two-thirds. Economic growth reached an eight-year high of nearly 5% in the past financial year, and China has begun a multibillion-dollar infrastructure investment program. The Karachi stock market rose 46% last year and continues to soar.
Pakistan experienced a “staggering fall” in poverty from 2002 to 2014, according the World Bank, halving to 29.5% of the population. That period saw a spurt of economic growth in the early part, a takeoff in property values, a surge in the money that Pakistanis working overseas send home (now $20 billion a year), while the government also started an income subsidy for the poorest.
Motorcycle purchases soared in Pakistan to 2 million a year now from 95,000 in 2000, leading Honda Motor Co. to double its production capacity there. Buyers of Honda’s cheapest motorcycle typically earn between just $200 and $300 a month, which would put them well below the poverty line in the West, but here that gives them disposable income.
“All these big companies globally, if they’re not looking at Pakistan, need to look at Pakistan, because it’s a huge consumption economy emerging,” said Saquib Shirazi, chief executive of Honda’s Pakistan joint venture.
