Tags

, ,

flag_map_of_pakistan-svg

Photo Credit: Wikimedia

In a recently released 2016 FM Global Resilience Index, which ranks the resilience of 130 countries to supply chain disruption, Pakistan ranked 117.

Why is resilience important in business, especially in developing countries like Pakistan? Resilience is the ability to withstand disruption and rebound quickly when necessary. It is especially vital for global companies doing business in a fluid, borderless manner, facing unknown risks in developing markets.

Before exploring new business avenues, companies and business owners consider various factors. The index identifies nine key drivers of resilience including: political risk, the quality of infrastructure, exposure to natural hazard, and commitment to risk management. These drivers are aggregated into three broad factors – economic, risk quality and supply chain – which, in turn, combine to form the index. The quality of supply chains depends on the quality of the local suppliers, the infrastructure quality and how well a country controls them, in addition to managing corruption.

Let’s take a look at which countries are troopers and losers in the index.

Composite Economic Risk Quality Supply Chain
Country Rank Score Rank Score Rank Score Rank Score
Switzerland 1 100 2 94.9 73 57.2 1 100
Norway 2 99.6 3 89.6 10 80.3 12 82.4
Iceland 3 98.4 7 77.2 1 100 25 73.8
Germany 4 94.6 16 72.1 13 78.4 4 91.2
Luxemburg 5 94.5 1 100 79 54.5 11 84.4

Switzerland achieved the top place in the overall ranking. It means Switzerland is the top country choice for expanding business. They have excellent business infrastructure, laws to root out corruption, and an active disaster management framework. Norway ranked as the 2nd overall choice for business, followed by Iceland, Germany, and Luxemburg.

Composite Economic Risk Quality Supply Chain
Country Rank Score Rank Score Rank Score Rank Score
Mauritania 126 27.9 116 24.5 36 66.1 130 0.0
Nicaragua 127 26.1 104 32.5 117 37.9 120 14.5
Kyrgyz Republic 128 22.2 128 7.5 97 52.5 110 18.1
Dominican Republic 129 20.4 62 42.2 13 0.0 94 27.6
Venezuela 130 0.0 13 0.0 127 24 128 2.3

The least resilient country for business is Venezuela because it suffers from extensive corruption, perceived low quality in local suppliers and poor infrastructure. Complete rankings can be found here.

Index Ranking and Pakistan

Composite Economic Risk Quality Supply Chain
Country Rank Score Rank Score Rank Score Rank Score
Pakistan 117 33.5 126 15.4 60 65.6 103 23

This index shows a lack of business confidence in Pakistan. The reasons are quite open- high corruption rate, poor policies for business growth, energy problems, political turmoil, and terrorism, to name a few. Citing corruption in supply chains as a reason, western companies continue to exit Pakistan. Because more highly ranked countries exist in the region, like Sri Lanka (41) and China (63), companies will consider the higher ranked ones before they consider to do business in Pakistan.

“Ranked 13th to last, Pakistan does not provide an opportunity worth considering for those businesses to look into which are undergoing expansion”, Haamiz Ahmed, Economist writer for ProPakistani explained. “This should serve as a wakeup call for the government that is currently involved in saving its own fortunes after disclosure of the Panama Papers. While a lot is being done to make our country more attractive to investors, Pakistan is still ranked [as] one of the worst”, he added.

This ranking should be a wake up call to the Pakistani government to review their priorities. A 360-paradigm shift is required, considering all the factors listed. It’s evident that less commerce leads to more unemployment, high inflation, and lower economic growth. If Pakistan wants business expansion, the listed factors must be considered for improvement, however it will not be a surprise to see Pakistan’s ranking get worse in the future.

Muhammad Talib Uz Zaman is a Program Officer with CIPE Pakistan