Effects of business with US companies on Pakistan's economy.

Author:Nisar, Ahsan

Byline: Ahsan Nisar

The contribution of American MNCs in Pakistan has been very significant not just in monetary terms but from qualitative angle as well. There are over 200 American entities operating in Pakistan under various sectors such as banking, energy, FMCG, agriculture and pharmaceuticals etc. A number of these companies are listed on Pakistan Stock Exchange (PSX). Some of the selected US companies are as under:

  1. Logistics (Uber, FedEx, Hertz)

  2. Financial services (CitiBank, JP Morgan, VISA, AIG)

  3. Technology (Oracle, Microsoft, IBM, Teradata, TRG, Nielsen)

  4. Pharma (Abbott, Pfizer, Lilly)

  5. Oil and Energy (Chevron, LMKR)

  6. Food and beverages (Coca Cola, Culligan, McDonald's, Dunkin Donuts, Pizza Hut)

  7. FMCG (Colgate-Palmolive, PandG, Muller and Phipps, 3M)

  8. Agri and Others (FMC, Cargill)

  9. Education and Apparel (Levi's, Berlitz, JWT)

Franchising implies that a domestic firm allows its production, sales, marketing, and management strategies to be used in a foreign market in exchange for a periodic payment. Domestic firms engage in joint ventures with foreign firms. A joint venture is a business arrangement between two businesses to produce a particular good, where these firms share expenditures, revenues, and assets. Foreign firms establish new subsidiaries in other countries.

The term Foreign Direct Investment (FDI) refers to establishing a new production facility, distribution network, management, and so forth in a foreign country. Parent companies have to transfer funds denominated in foreign currency to the FDI-receiving country. Also, depending on the FDI-receiving country's restrictions, parent companies may receive income/profits from their foreign operations denominated in foreign currency.

In terms of exports from Pakistan, USA has almost 16% market share. However, there's significant opportunity to enhance this number with the support from US government through a Free Trade Agreement (FTA) going forward. During the last five years, USA remains one of the largest contributors to the Foreign Direct Investment (FDI) in Pakistan. The position is no different in case of worker remittances with almost 14% of the total remittances coming from USA alone.

These are high-value remittances and there's tremendous potential to attract the remittances further from this corridor through offering various...

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