Australia Post Covid Opportunities

The Covid-19 pandemic, besides creating an unprecedented health crisis, has rattled the global economic order. The post-pandemic environment, besides its challenges, also offers multiple opportunities for Pakistan-Australia bilateral trade and investment. Though Australia and Pakistan are open economies integrated into global trade channels, their bilateral trade and investment levels are suboptimal. In 2019, Australia was the 22nd largest trading nation in the world but the 34th largest trading partner of Pakistan.

Opportunities in Trade

The massive economic jolt administered by the unprecedented pandemic has created its new set of winners and losers in terms of countries, sectors and enterprises.

IT-enabled Services

With the restrictions on international travel, the globalisation of services is witnessing an upward trajectory, in contrast with the anti-globalization trend in products. The telecommuting of IT-enabled services e.g., Business Process Outsourcing, Consultancy and Software Development is expected to witness a sharp rise. The Aussie enterprises can benefit from collaboration with the Pakistani enterprises owing to the latter’s cost advantage.

Information Technology

The pandemic has fast tracked the digitalisation of lifestyles. The online retailing is increasingly grabbing market share from the physical retailing, which is becoming economically unviable due to the large space requirement in social-distancing-compliant retail outlets. Besides, the involuntary test-run of the work-from-home model during lockdowns has established the viability of operations through distant working with its associated savings on office and operational costs. The increased digital consumption is setting a new pace for the development of IT services. Pakistan, already having a reasonable supply base of IT, is an attractive source of collaboration for the Aussie companies to benefit from this digital growth spurt especially in Fintech, Internet of Things (IOT), Robotics, Artificial Intelligence (AI) and Blockchain.

Diversification of Supply Chains

The disruption in supply chains during the pandemic has prompted an active search by the Aussie enterprises to diversify their supply sources, especially to reduce reliance on traditional supplying countries. It offers opportunities for bilateral cooperation between Australia and Pakistan, since Pakistan offers a viable alternative source in several sectors e.g., home textiles, garments, rice, fish, spices, processed food, salt, footwear, leather products, sports goods, surgical instruments, cutlery, iron & steel pipes and flat rolled sheets, stationery items, electric pumps, fans and other light engineering goods.

New Sectors

The adjustments in lifestyles and economic structures have created new sectors of opportunities. The sectors like travel products and services, tourism and airline etc. are under pressure, while the healthcare and wellness products, protective gear and hygiene products are emerging as new winners. Pakistani manufacturers, due to an existing advantage of indigenous raw material base of ethanol and a vertically integrated textile industry, have rapidly diversified into production of sanitisers and masks to meet the domestic demand and commenced exports. Aussie enterprises can import these products from Pakistan as a competitive source of supplies.

Research Collaboration

The pandemic has underlined the global need for flow of ideas and research collaboration. Faced with a gigantic threat, the countries and enterprises have been forced to share the knowledge on pandemic control and collaborate on research. It opens new vistas of collaboration between Pakistani and Australian universities and other research institutions.

Opportunities for Investment

In the post pandemic environment, there are avenues for investment by Aussie enterprises in Pakistan.

Ease of Doing Business

One, due to its strategic endowments, Pakistan offers multiple advantages as an investment location. The country is strategically located at the crossroads of South Asia, East Asia, Central Asia and Middle East. More than 40% of entire global consumer base and an import market of US$ 2.15 trillion is available on its immediate borders. Pakistan’s own 220 million consumer base, the world’s 5th largest, and a youth bulge offers a potential demographic dividend. Goldman Sachs has identified Pakistan as one of the Next Eleven countries (along with BRICS), which can become the world’s large economies in the 21st century. The security environment has drastically improved during the last few years. The institutional and regulatory reforms have improved the ease of doing business, culminating in a leap of 28 places in World Bank’s global ease of Doing Business ranking in 2019, making Pakistan one of the world’s top 10 business climate improvers.

Production Efficiencies – Textiles, Leather, Sports Goods, Surgical Instruments

Pakistan has an efficient textile and garments industry, currently exporting to more than 180 countries. In the Australian market, 67% of Pakistan’s exports are textiles and garments; in certain product categories e.g., bedlinen, Pakistan is one of the market leaders. The Aussie enterprises can benefit from investment in the textile manufacturing with buy-back for the Australian market and export to the European Union on zero duty under GSP Plus and to China under Pakistan-China FTA. The same production efficiencies exist for investment in traditional sectors of leather goods, food processing, surgical instruments and sports goods, and emerging sectors of pharmaceuticals, sanitisers, woven and non-woven masks and light engineering products.

Strong Agriculture Base – Agrofood Sector

Pakistan like Australia has a strong agricultural base but suboptimal crop yields and under-developed processing infrastructure. Aussie enterprises can find lucrative investment opportunities in agricultural research, food processing technologies, cool chain infrastructure, dairy, fish, poultry, meat production and processing.

A Vibrant Pakistani Diaspora – SME Project

There is a vibrant Pakistani diaspora in Australia, contributing constructively to the multicultural character of Australia. A majority of the members of Pakistani-Australian community have the advantage of dual socialisation and educational exposure – early education in Pakistan and tertiary in Australia. The diaspora can serve as an economic bridge for joint ventures between Pakistani and Australian enterprises.

Competitive IT Sector

Pakistan has a highly competitive IT sector. The country has not only a large number of internationally certified IT companies in software development, enterprise resource planning (ERP), financial solutions, mobile content, document management, enterprise computing and business process outsourcing (BPO), but also a talent pool of around 300,000 English-speaking, cost-competitive and skilled IT professionals. According to Oxford Internet Institute ranking, Pakistan has the 4th largest online workforce in the world. Besides, Pakistan boasts of offering a liberal foreign investment regime of 100% equity ownership, 100% repatriation of capital and dividends, and income tax exemption for IT exports till June 2025. A number of Aussie enterprises have already been benefitting from Pakistan’s IT backbone through establishment of joint ventures, offshore offices and software development centres. There is, however, potential of substantial increase in the wake of Post-Covid IT growth surge.

The above is merely a snapshot of the trade and investment opportunities available for bilateral cooperation between Pakistan and Australia. An immense complementarity exists between both the countries in the fields of agriculture, mining, manufacturing and services. The enterprises on each side can benefit from relative strengths of the other side, for a mutual advantage, especially in the wake of new realities emerging out of the pandemic-induced economic shakeup.