Pakistan and China: Case Studies

¶ … Pakistan and China Infrastructural Development and Labor Availability in Pakistan Pakistan is a third-world predominantly Muslim republic located in the Continent of Asia between longitudes 610 and 75.450E and latitudes 23.30 and 36.450 N. It borders China in the north, Afghanistan in the north-west, India in the east, Iran in the west, and the Arabian Sea in the south. It covers a total land area of 796, 096 sq. km, with a population of around 130 million, more than two-thirds of which lives in the rural areas.

Fig 1: the Geographical Location of Pakistan (source: infoplease.com) Its strategic location: Makes it a center of the Muslim world -- to the east lies Bangladesh and a stream of other Muslim countries, to the north lies six Muslim countries that gained their independence from Russia in the 1990s, and to the west lies Iran, Afghanistan, and a chain of Muslim republics spreading through the Middle East into Africa.

Grants it control over the Arabian Sea, and consequently, the industrial progress of the West, whose countries obtain most of their oil from the Gulf states and ship the same through the Arabian Sea and the Indian Ocean iii) Grants it control over international trade in the region -- since most of Russia' seas are snow-capped for the better part of the year, the Arabian Sea, with its warm waters, basically drives regional trade State of Transport Infrastructure Transport infrastructure in Pakistan has shown significant improvement over the years; however, it still remains relatively deficient compared to other countries such as China, Japan, Russia, and Saudi Arabia (Vision 2030 Planning Commission, 2008).

The situation is even worse in the rural areas, which despite bearing the larger proportion of the population, report lower quality of life, with very deficient physical transportation systems, and inadequate health and educational facilities (Vision 2030 Planning Commission, 2008). Fig 2 below shows the percentage of Pakistan's rural population that lacked access to an efficient road network between 2001 and 2002. Fig 2: Lack of Access to Paved and Motorable Roads in Rural Pakistan by Quintile (2001-02 PIHS) Figure 2: percentage of rural population lacking access (Source: Essakalli, 2005, p.

4) Currently, there is only 97,881 km of road serving rural Pakistan, compared to 157,975 km serving its cities. These disparities in infrastructural development have largely been attributed to the rural-urban divide that has led policymakers to continually focus on improving the infrastructural position of urban areas at the expense of rural areas. Pakistan's economy is driven primarily by agriculture, and the current state of physical infrastructure makes it difficult to ship agricultural produce to the cities. Rural-urban migration continues to be a fundamental social problem.

The government expects the urban population to rise by around 80 million by 2030. Infrastructural development is, however, not growing at the same pace. With such high population growth rates, multilane road networks and flyovers are necessary; however, these are almost non-existent, making traffic jams prevalent, and the distribution of tradable commodities a huge challenge (see images below obtained from Google.com). (Source: Google.Com; Traffic Jam in Lahore City, Pakistan) Labor Availability: Pakistan has a relatively high unemployment rate, 15.4% to be precise.

This figure, given the country's population, represents a significantly large number of people who are willing and able to work at the prevailing wage rate but cannot secure jobs (Salman, 2011). One of the primary reasons why the unemployment rate has remained so high is the large illiterate population -- Pakistan's illiteracy rate currently stands at 51% (Salman, 2011).

Illiteracy translates to lack of skill; and this perhaps explains i) why most of the country's workers are concentrated in menial jobs such as manual labor, farming, and driving; and ii) why the labor force participation rate has remained so low (Salman, 2011). Part Two: Changes Observed in the Chinese Retail Market between 1995 and 2004 Government Regulation: Prior to 1995, the Chinese government restricted the entry of foreign retailers into the market.

Owing to this, the market comprised mainly of local retailers, who concentrated their operations in big inland towns and coastal cities in a bid to capitalize on middle-class consumers and visiting tourists. As a result, rural areas in the country remained largely underserved. By 1995, however, the Chinese market had been open to foreign investors.

The issuance of the Measures for the Trial Establishment of Foreign-Invested Commercial Enterprises by the Ministry of Foreign Trade and the State Economic Trade Commission in 1999 meant that foreign investors could venture freely into all Chinese provincial capitals, and enjoy a majority ownership in their joint ventures with Chinese companies. Demand and Competition: With the entry of well-known foreign giants such as Carrefour and Wal-Mart, who used their scale and scope economies to win local customers through low prices, competition in the retail industry became very intense.

Local retailers were forced to lower their prices, making the traded merchandise more affordable to a wider range of consumers. Demand increased as low-income consumers could now afford the products on offer. Retailers, both local and foreign, began to shift their attention to the underserved rural market in a bid to avoid the inherent competition in cities. This devolution of market activities increased demand even further as it brought the rural population on board. Companies had to invent strategies that would enable them to gain competitive advantage.

New business concepts including product differentiation, localization, the effect on demographics on business strategy, and differential pricing were introduced by foreign retailers, and adopted by local retailers. These very features continue to characterize the retail market today; however, more and more local retailers are merging with these big foreign giants, and each day, these foreign retailers increase their dominance and geographical presence in the market, reducing the intensity of competition. Today, the market is saturated with established foreign retailers and very few local retailers. It is expected.