Pakistan

Islamic Republic of Pakistan

Country Report Islamic Republic of Pakistan

By Myat Soe Facilitator: Jeffrey F. Sherlock, Ed.D.

Due May 18, 2006

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. Americans 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 United States. 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. Additionally, the Islamic extremism in Pakistan, growing in power and influence, has found a new target: western countries. The extremists in Pakistan and their leaders are targeting the U.S government, its citizens as well as members of minority indigenous and religious groups. This information allows companies’ executives and their employees to learn how to live a safe and quality lifestyle in Pakistan. It is suggested that companies should offer training programs to employees. The first program should inform employees on how to conduct business transactions and how to interact with people in Pakistan. A second training program should be set up for executives, managers, employees and their families to help them adjust to living in Pakistan. Executives and all employees should be briefed about the religious sensitivity

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of the people in Pakistan. It is evident that additional research must be done to set up the recommended training programs. 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, how to negotiate, what are the proper business gifts and much more. 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 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.

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In 1947, as British rule came to an end in 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

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conducted its own tests in 1998. Today, the long-term goal of both nations is military stability, and promising discussions continue. 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. Conflict history and political situation: Pakistan gained independence on partition of British India 1947, leading to massive refugee flows; creation of single state comprising two wings, West and East Pakistan, separated by 1000 miles of Indian territory; and 1948 war with India. East Pakistan (Bangladesh) seceded 1971 leading to civil war and further clashes with India (Conflict history: Pakistan, 2005). Since 1958 military has played a major role in formation of Pakistan’s governments, frequently allied with religious right at expense of secular and mainstream political parties. Pakistan’s 1973-77 democratic interlude under Zulfiqar Ali Bhutto's

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premiership ended with installation of General Zia as military ruler 1978-1988. President Pervez Musharraf came to power in 1999 coup against elected Prime Minister Nawaz Sharif, promising to end corruption. In the report of International Crisis Group, released in November 2005, the military, through National Intelligence Service (ISI), supported the Taliban regime in Afghanistan, financed and trained militias against Indian-administered Kashmir, and overlooked nuclear proliferation. Pakistan joined U.S.-led “war on terror” follows the September 11, 2001 attacks, promoting Musharraf’s image abroad as secular reformer and U.S. ally. Throughout the past years, political stability proved elusive for Pakistan. Although election was held, stability was threatened by the terrorist tactics resorted by opposition groups from both political and religious extremes. Coups and countercoups, assassinations and suspension of civil liberties became regular occurrences. Pakistan is a country with nuclear weapons capability. Pakistan tested nuclear devices in 1998 after the Indian test. Head of Pakistan’s uranium enrichment facility, Dr. Abdul Qadeer Khan, revealed in 2004 to have proliferated nuclear technology to North Korea, Libya and Iran. Khan released after public apology (Country Profile: Pakistan, 2006). Economy: According to the C.I.A Factbook, 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

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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. Pakistan Key Economic Indicators Sources: CIA - The World Factbook

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Population, pop. Growth rate

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Infant morality

70.45

70.84 (M)

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Life expectancy male female HIV rate Literacy rate GDP Percent of GDP  Agricultural  Industrial  Service

63.39

62.40

70.04 (F) 62.44 (F)

0.10%

74,000.00

4,900.00

48.70%

61.7 (M)

35.2 (F)

7.80%

384.90

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GDP per capita Percent of population below poverty Inflation rate Labor force Percent of occupation  Agricultural  Industrial  Service Unemployment rate Exports and Imports External debt Reserves of foreign exchange and gold Economic aid Identify what their currency is

165,803,560

21% 25.10% 53.30% 2400 32% 9.20% 46.84 42% 20% 38% 6.60% 14.85b 39.94b 11.71b 2.4b Rupees

21.26b

Islamic Republic of Pakistan Expenditure of military Communication and transportation  Tel( main line in use)  Cell/Mobil  Internet Users  Airport (91/43)

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4.26b 4502200 5022900 7.5 134

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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 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. 3The 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 1

The U.S. Agency for International Development: “Helping Pakistan builds modern prosperous and democratic State.” 2

Pakistan: “U.S. Department of State Background Note.”

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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 (Deresky, 2003). 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 (International Gift Giving for Business, 2006):  Avoid pork and pork products like ham, bacon, pate, hot dogs or sausage. Avoid food prepared with pork products like lard, which can include even pastries. It is a good idea to avoid any pork dishes at a banquet when Muslims are in attendance because the other dishes might become contaminated in preparation or serving.

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Pakistan 2005 Earthquake: “Preliminary Damage and Needs Assessment, Prepared By Asian Development Bank and World Bank.”

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Don't serve shellfish like crab or lobster. Fish is an acceptable alternative to meat and shellfish. Some Muslims prefer Zabihah meat which has been slaughtered according to special rules. Zabihah meat is similar to, but not the same as, kosher meat.  Do not serve alcohol in the presence of guests, especially government or religious officials; even if you know that the individual may drink in private. Many Muslims, however, do take exception to the rule forbidding alcohol. Pakistanis, for instance, are more liberal and frequently consume alcoholic beverages. But, it's best to err on the side of caution, especially in public. The hosts serve fruit juices for toasts when alcoholic beverages cannot be consumed. Avoid food cooked in alcohol, even if all the alcohol has burned off in cooking. Muslims fast until sundown during the month of Ramadam.  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. 4

Pakistanis are a very fashion conscious nation. Fifty percent of men and ninety-five

percent of the Pakistani women wear their national dress (Pakistan, 2006). The men wear baggy pants that get narrow at the ankles. They are called salwar. 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. 4

Modern Muslima and Saraji Umm Zaid: “How to Hijab: Different Styles of Over (Outer) Garments.”

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In the 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 (International Gift Giving for Business, 2006)

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Pakistan is a secularized Islamic nation. Politeness is important. The pace of

negotiation is slower in Pakistan compared to the US. Pakistanis are hard workers, but they have a relaxed attitude towards time. Most businesses are family-owned and the key decision maker is almost always the head of the family. Personal life revolves around family and friends. A personal relationship between participants must be established before any formal negotiations can take place. There is a definite social hierarchy. The privileged elite control the country, with conspicuous consumption and education being the main status symbols. Pakistanis do business with the person, not the company. Therefore mutual trust must be established. A successful negotiator uses references to people who are highly respected by the opponents to persuade them to change their minds on some issues. They prefer to negotiate through a trusted intermediary. Compared with westerners, Pakistanis have a casual approach to deadlines and frequently lack the authority to finalize a deal. Pakistanis managers have long traditions of consultative decision making, supported by the religious beliefs. However, such consultation occurs more on a personto-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. The people in Pakistan are living under the military dictatorship. Consequently bribery is generally accepted practice. According to the 2001 Corruption Perceptions Index, Pakistan was ranked in seventy one and scored two point three (Deresky, 2003). The score relates to perceptions of the degree of corruption as seen by businesspeople, academics, and risk analysts, and ranges between ten (highly clean) and

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zero( highly corrupt). These index numbers suggests that Pakistan scored high level of perceived corruption in government and public administration. Medical Facilities and Health Information: The consular information sheet of the US embassy in Islamabad states that adequate medical care is available in major cities in Pakistan, but is limited in rural areas. Facilities in the major cities vary in level and range of services, resources, and cleanliness, and Americans may find them below U.S. standards; facilities in rural areas are consistently below U.S. standards. Medical facilities require prepayment and do not accept credit cards. Many American-brand medications are not widely available, but generic brands from well-known pharmaceuticals are widely available. The quality of the locally-produced medications is not known. Special Circumstances: Americans planning travel to Pakistan should know about common business transactions. Pakistan is largely a cash economy. Personal checks are not commonly accepted. Most Pakistanis do not use checking accounts for routine transactions. Outside of major cities and tourist destinations, credit cards and travelers' checks are generally not accepted, and there have been numerous reports of credit card fraud (Travel Warning for Pakistan, 2006). There are bank branches as well as registered money-changers in all international airports. ATMs can be found in major airports. English is widely spoken by professional-level airport staff Conclusions: By exploring the country of Pakistan, I have drawn five conclusions that are especially relevant to the company’s executives, managers, employees and their families

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who will be relocating from the United States to Pakistan. The conclusions I have reached are the following: 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. Pakistan 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.

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The business protocol in Pakistan differs from Western business norms. Like Pakistan culture, the business protocol used in Pakistan is drastically different from the business protocol practiced in the United States. Appointment making, negotiating, business entertaining, and giving gifts are just four of the areas where doing business in Pakistan is not the same as doing business in the United States. Pakistan has incentives for foreign investors. 5

Pakistan has the most liberal investment policy in the South Asia region. New

incentives and further liberalization measures include:

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Reducing minimum foreign equity from US$ 0.5 million to US$ 0.3 million,

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Zero import duties on capital goods, plant and machinery and equipment not mad locally.

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Zero import duties on raw materials used in the production of exports

Recommendations: Based on the conclusions of my research, I recommend that companies take four specific actions to insure that their executives, managers, employees and their families are happy and successful in Pakistan. I recommend that companies should: 1. Do more research. This report should not be viewed as an exhaustive commentary on the culture and business protocol used in Pakistan, for it is merely a brief overview of the information one should know before attempting to live or do business in Pakistan. Therefore to help insure the success of business operations in Pakistan, companies should 5

Board of Investment: Government of Pakistan: “Pakistan's Business Strengths.”

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continue to gather and analyze relevant information regarding living and doing business in Pakistan.

2. Setup a business protocol training program for executives,

managers, and employees. To insure that executives and managers have a clear understanding of the differences between Pakistan and the United States in the area of business protocol, companies should set up a training program for executives, managers and employees who will be doing business in Pakistan. The training program for executives and managers should devote time to the discussion of appointment making, negotiating, and business entertaining, and giving gifts in the Pakistanis business community.

3. Setup

a cultural training program for executives, all employees and their families. To make sure that executives, employees and their families are knowledgeable about the cultural norms of Pakistan, companies should develop a training program to educate them about the Pakistan culture. The training program for executives, employees, and their families should focus on cultural customs in Pakistan with regard to greetings, gestures, eating, and the role of women.

4. Warn

executives, managers, employees and their families about the religious sensitivity of the people in Pakistan and violence against westerners.

Before

sending executives, managers, employees and their families to Pakistan, companies must spend adequate time educating them about the past experiences of violence against Americans in Pakistan. In fact, several incidents of violence against American officials and U.S. mission employees in Pakistan have marred the relationship.

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References: Board of Investment: Government of Pakistan: “Pakistan's Business Strengths.” Retrieved May 10, 2006, from http://www.pakboi.gov.pk/Overseas /pakistan_s_business_strengths.html CIA - The World Factbook – Pakistan: “Country Profile.” Retrieved May 10, 2006, from http://www.odci.gov/cia/publications/factbook/geos/pk.html Deresky, H (2003). International Management: Managing Across Borders and Cultures (4th ed.). New Jersey: Prentice Hall. International Crisis Group: “Conflict History: Pakistan.” Retrieved May 10, 2006, from http://www.crisisgroup.org/home/index.cfm?action=conflict_search &l=1&t=1&c_country=86 International Gift Giving for Business: Retrieved May 10, 2006, from http://www.cyborlink.com/besite/international_gift_giving.htm Modern Muslima and Saraji Umm Zaid: “How to Hijab: Different Styles of Over (Outer) Garments.” Retrieved May 10, 2006, from http://www.modernmuslima.com/jilbabhow.htm. Pakistan: “U.S. Department of State Background Note.” Retrieved May 10, 2006, from http://www.infoplease.com/country/profiles/pakistan.html Pakistan 2005 Earthquake: “Preliminary Damage and Needs Assessment, Prepared By Asian Development Bank and World Bank.” Retrieved May 10, 2006, from www.worldbank.org.pk

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Supporting Human Rights and Democracy: “The U.S. Record 2005 – 2006 Released by the Bureau of Democracy, Human Rights and Labor.” Retrieved May 10, 2006, from http://www.state.gov/g/drl/rls/shrd/2005/63948.htm The U.S. Agency for International Development: “Helping Pakistan builds a modern prosperous and democratic State.” Retrieved May 10, 2006, from http://www.usaid.gov/pk/ The World Bank: “From Crisis to Growth- Pakistan’s Poverty Reduction Strategy.” Retrieved May 10, 2006, from http://siteresources.worldbank.org/PAKISTANEXTN/ Resources/CAS/Summary.pdf The World Bank: “A Plan to Get Girls in School in Pakistan” Retrieved May 10, 2006, from www.worldbank.org.pk The US embassy in Islamabad: “Consular Information Sheet.” Retrieved May 10, 2006, from http://usembassy.state.gov/islamabad/ The US embassy in Islamabad: “Travel Warning for Pakistan.” Retrieved May 10, 2006, from http://travel.state.gov/travel/cis_pa_tw/cis/cis_992.html

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