Private equity may also highly define as investing securities by negotiated procedure. The place of market equity is highly uncomfortable due to availability of data, input or information asymmetries. So here is in private equity firms requires or needs highly specialized or educated people or managers who helps out to decrease or remove their inefficiencies to produce or get better out or return.
Equity market is general public market where stocks of securities are traded without having a physical existence. Thus securities are listed on stock exchange and these assets are traded only privately.
Private equity firm is IST like a business that makes use of securities in order to gain profit or income. And private equity is not interested in buying and selling with the companies for making a short term profit. This private equity do something attached or engages in purchasing and selling venture for a motive of long term return on investment. It not necessary for private equity to found or formed by a set of people who have a similar motive. Actually the formation of this sort of firm may be beginning with a single common project. As the project begins to yield returns. And the partner of this firm may look the similar ventures to continue the operation of the company for making profit. And the company according to the partners aims or vision may look particular or different sort of firms and contribute their interest to include different kind of investment schemes.
Note:
Private equity can go for any number of investment approaches means there is no limit for investment. There are 3 kind of investment are commons are:
Pakistan with its limited institutional equity activity invite long term capital appreciation by investing in undervalued company during its "catch up" growth phase.
Due to the vast change of environment in Pakistan the private investor can invest in many sectors. Due to this change the confidence of the investor has increased.
Ch#1
Introduction
Background
Private equity is Ist receive money from people for the well being of the company also private equity can raise their profit through sale of security in private equity market place is uncomfortable or inefficient due to lack of information. So highly skilled person is required. Who know about investment strategies. Because investor the value addition returns in firm which they are going and invest.
Why invest in private equity
There are two reasons due to the investor invest in private equity which are written below one by one:
The main charactices that differentiate private equity to other firms is
Allocation of assets:
In private equity firms the allocation of assets is illiquid nature. Means an investor can receive a typical return on equity fund for ten years.
Private equity has been shown modest correlation to public equities even lower their bonds yields showing it can be a excellent diversifier when added to a portfolio of stock and bonds. Base on there charactices adding private equity to a diversified portfolio is becoming common place.
Modern theory says adding an alternative asset to a diversified portfolio can increase expected return and reduce standard deviation.
According to study 2oo1 of Saloman smith Barney by professor Paul rompers and josh Lerner of the Harvard business school found that, from January 1972 through the end of 2000, if you put private equity to a port folio converts the whole or entire effective or efficient frontier to higher return with lower risk in this study. The Saloman examines the case of investor who has initially investment.
Means Soloman examine in this study who much the investor has to allocate in initial different allocation forty percent in large stock, ten percent in small stock, twenty percent in long term bonds. Twenty percent corporate bonds and ten percent cash. The return must be 12.5%. a standard deviation must be 11% and a sharp ratio. The relative efficiency of the portfolio or return per unit risk 0.995.
In other way
If a investor reduce the large stock from 40% to 35% and the corporate and government bonds from 20% to 15%. Then the average return will increase to 16% in this scenario. All the other elements like standard deviation will also from 11% to 13.6% and the sharp ration will also increase from 0.995% to 1.0582%.
(www.altassts.com)
Equity: meaning
Equity means the money receive from the interested people for the well being of the company. It can also be said that the investor invests their fund in the firm and become the share holder of the company.
Equity interest is IST like an ownership in a firm. It also refers residual dollar value for future trading account. Assuming its liquidation is at the going trade price. Dollar difference between what a properties would be sold for and debts claimed against it. Equity must be equal to the value of securities and the debit balance in a margin account. Equity is also shorthand for stock market investments. In other sense equity gives you an ownership if you own stock, you have equity in or own portion of stock which is issued by the company.
Equity differentiates between current value of the assets and the value which is to be sold or claim against it. For example if you own a home of Rs 3,00,000 but yet owe Rs 2000. So in this case your equity will be Rs 1, 00,000.
The other example according to your account is same if you own a stock on your margin account Rs of 5,00,000 and if you have taken loan of Rs 2,00,000 in your margin account because you have taken loan of Rs 2,00,000 your equity will be 3,00,000.
So
The difference between value of the property and mortgage debt is called equity. Under the federal law if 1 equity in property reaches to 22% and the value of the mortgage reduce 78% then the private mortgage is supposed to automatically cancelled.
The responsibility of the court is to know what the true and fair view under the circumstances. Because real states always enjoy a protected status in the court. So it is very easier to get equitable relief when real property is involved. For example there is no legal theory to find in the favor of the property if one person builds a house starting of October 2008. According to the (www.bis.org) the total world market of derivatives is approximately at about 791 trillion face or nominal value. So the value of derivatives show in the national value so it cannot be directly related to a stock or fixed income security which is actually shows in the real value. Moreover many of the illiquid securities treated valued in the stock market other than its real price of market. And a stock which is traded in the stock market is listed in the stock market and exchange. And for this purpose the combine firms try to bring a buyers and sellers of organization for listing or registration of the stock and securities as well. Here is the big stock market in the united states which providing a great contribution in the stock market which is written below namely by market cap:
New York stock exchange.
NYSE.
Toronto stock exchange in Canada.
European stock exchange.
London stock exchange.
Paris bourse. And
Deutsche brose.
Trading:
Trading means any dealing from small to large investor which is carried through a specialized a professional. Professional are the people who take the order and their order normally closed in a stock exchange.
There are so many methods of trading open market. Means a market having a physical location. And the entries are carried in a fixed floor by a fixed price. This sort of trading is used in the stock of commodity market where buyer or seller come "verbal" bids and ask on his neighbors land or place. And no count demand or require the property owner to tear down the encroaching part of the house. Usually courts require landowner to sell and the house owner to buy. So, there is the small amount of land is necessary to fix the following problem.
Problems:
Stock and any other property representing an ownership interest.
Co. balance sheet and the amount contributed by the owner of retained earning must also referred to shareholder equity.
In margin trading the value of the securities in margin account must be shown. What has been borrowed from the brokerage.
Difference between the current market value of the property and the account the owner still owes. It is the amount that the owner will receive after selling and paying off the mortgage.
Investment strategies IST one is principle assets class2nd is fixed income and cash equivalents. These two sorts of strategies are use for the allocation of assets. Return on portfolio for an investor etc.
Equity means or equity refers to ownership and liability. So that why the basic accounting equation is:
Assets =liability +owner equity
The word of equity can also be used for fairness of justice.
Equity or stock market.
Equity or stock market is the market where the company stock and securities are traded privately. Equity market is a general public market. Equity market not having a physical existence. According to the seeking ALPHA.com. The size of the world market of stock and securities was approximately at about 36.6trillion US at price consecutively. Another kind of trading is computer network trading in which trading all the transactions take place through net or electronic devices. A trader takes an order through a computer.
Actual trade:
Actual trade means where a specific buyer have a bid price for a stock and where the specific seller have a ask price for the stock. (buying and selling market means) where buyer price match with a seller price then the sale takes place on a first-come-first served basis if the buyer and given a price for a stock.
The main purpose of the stock exchange is making easy to buyer and seller for the exchange of securities or stock at a specific (real or virtual) market place. The exchange gives accurate information about trading for securities which is registered on a stock exchange.
We can say that its help to find or discover or invention of price.
The new York stock exchange is a physical stock exchange in which only a stock trader which is listed on a stock exchange no other stock are traded in new York stock exchange in which the members of the exchange takes the order and the sent it to the floor broker. And the broker goes to the specialist of trading and says that stock of order has to be traded.
The specialist of trading do his work in the open market for buy and sell or different sell or different sort of order if a spread ix exist no dealing can treat immediately. In this situation the specialist of trading use the sources of his/her own stock or cash to finish the difference after his/her experiment time. In this whole process the computer gives a important character because in this process a specific amount of human is use. So it is called "program trading".
According to the (www.investopedia.com)
NASDAQ is a real listed exchange market about price in the market. Means the investor can take an idea about price. "what price existing in the market". On the other hand the investor knows by using charts and technical method about the future price according to the company prospectus. Means technical approach helps to the investor about current and future price as well "what price existing in the market". And what price will be in market. So we can say it technical approach is IST like a pricing model for the investor. Example of technical approach can be trend following methods, used by John W.Henry and edseykota which takes a pattern of price with a solid money management and also well established risk control and variety of investment and many of the people can use index method for investing.
INDEX METHOD:
Another approach for investing is index approach in which approach. One of the people takes weighted or unweighted portfolio which is related to the whole host of market or some part of the stock market. The main purpose of this strategy to improve the variety of investment and reduces the tax liability for particular trading and also increase the nominal pattern or trends of the market.(which is in the US has average nearly 10% year, annually since world war 2).
PRIVATE EQUITY:
(According to the business dictionary.com)
Private equity means the people invest their funds in the firm that are not traded publically. That is traded only privately or some part of their funds invests in public sector to make them private and for privatization. So in private equity there is different kind of investment strategies which is written above one by one namely: but due to the passage of time. The market has become a more institutional. The buyers and sellers have many sort of participation like pension fund, hedge fund, investor groups, banks and other financial institutions. Due to the visit improvement of market supporter the operation of the market has bust-up. Then the government of Pakistan decreases the penalty or fine for market and for small investor. So after the improvement of the market supporter the government has to get fee for large institution. Due the vast improvement of market institution the corporate governance is adversely affected.
INVESTMENT STRATEGY:
Investment strategy means people want to know so many things about investing. Means "How do I make money?" So there are two sorts of strategies for investment which are use for investment. Which is written below one by one:
STRATEGIES:
Fundamental analysis.
Technical analysis.
Index method.
FUNDAMENTAL ANALYSIS:
Fundamental analysis approach is that approach in which the investor makes analysis of a company through or by checking of financial statements of the company to check SEC filling. Ventures trends, General economic trends etc. due to check of financial statements of the company the investor takes or make analysis about company financial position. Either company has the ability to repay its investment or not which is going to invest.
TECHNICAL APPROACH:
Technical analysis approach is that approach in which the investor makes analysis for a long time. The people of the United State invest their income in stock market. If you invest in the stock market means you are following the way of life in United States and this type of investment are equity investment. Even if you deposit a few amount of fund in the bank directly you are investor by the way of bank portfolio. Debt investment is a long period investment so therefore the profit on this sort of investment is realized. By the way of the payment of the dividend and income earned on debt of particular stock. So that why most of the people or equity investor do not have the securities or certificate. Normally they have open an account in a bank or make a relation with fund manager who have physically access to the stock and certificate for the well being of the investor or to help out the investor. So equity capital means a company earns income by exchange of share ownership in the company. Debt investment means it is a type of fund or loan which repay after some time or not by the share of ownership right and the profits of the dividend. Means the company repays the fund out of company profit.(www.wisegeek.com).
MUTUAL FUND:
A fund which is collected professional and mutually such sort of fund is known as pooled fund. Pooled fund also very known type of equity investment.
VENTURE CAPITALIST:
Venture capitalist means the person who invests in the company at the very start of its operation. Other some make investment for starting venture or business or company. Leverage Buyouts (LBO), business capital, distressed investments and mezzanine. So much time there sort of investment treated in short term in nature.
Leverage buyouts consist a financial sponsor. The financial sponsor accept all kind of requirement for the acquisition so the sponsor has to increase the acquisition debt that ultimately see to the cash flows of the acquisition and take interest itself for the original payment. And the amount which is collected by the financial sponsors for acquisition no one can claim or target for it. So these sorts of financing or leverage buyouts benefits have two root or ways which is written above.
The investor has to give complete information about capital which is actually required acquisition.
The return on his investment should be encouraged. So the buying price of leverage buyouts targets and the amount of debts use in different series like relating to the financial condition and history of the acquisition relating to the market circumstances. And also for wish of money taker for the increment of credit for both company and for the financial sponsor to be required. And relating to the interest cost and also responsible to saw this cost. Approximately the debt amount of an LBO will range from 60% to 90% of the buying price. So if this situation so exist at that time so the equity ratio may be greater than the historical cost. (Steven N.Kaplan and Per Stromberg, 2008).
EQUITY INVESTMENT:
Equity investment means investment in different stock or different corporation fund parts in every asset. Means how much funds every assets has. And the investor must have to know where the company actually is located. For example some investor purchases stock from small to medium sized companies only. And some investors look for a particular sort of stock. (www.wisegeek.com).
So equity funds deals with different types of stocks someone wants to buy share in equity funds that only deals with blue chip companies or put your attention on a particular industry. Some equity funds are deals with energy or precious metals stock. And someone focuses on certain geographic location and buys stocks in US, Canadian or foreign companies only. And the prospective investor must wants to know that their investment will be rise or fall due to change in the market trends. Because the professional or funds managers could be a well educated and experienced but not give the guarantee about investment, because has not an idea about market how the market will go or how long the equity market going forward. If you want to take an idea about equity fund how the equity fund have work in the past is not a good idea for prediction of future that hoe equity fund will perform in the future. Some of the investor sees the previous numbers and use them for their decision making where they have to invest. It could not be the good idea and create some kind of risk a well in equity fund. And if the investor has already prepared himself for invest with fund manager at the time. And knows the trend of the market which happens in the market. So a good equity investment helps to make a qualitative decision. (www.wisegeek.com)
Equity investment also has a positive effect of the company it helps to the manager of the company profit decision making. Be equity investment normally reflect the company profit and losses of that result from day to day management decision of the company. The other investment is debt investment means a company earn take loan by issue of stock or share certificate. And in this sort of investment the company can take the responsibility for the security and the profit is not paid on company profit. But the profit of this sort of investment is paid on interest on loan. If you deposit loan you will be indirectly and debt investor as well as equity investor. (www.bisegeek.com).
EQUITY FUND:
Equity fund means equity fund is just like a mutual fund in which fund the investor spend money in to different sort of stocks. The investor purchase share in mutual fund to other people. The mutual fund is managed by a fund manager a group of professional. These professional has the resources to reaches the company and these fund manager knows or these sort of professional having the complete knowledge about the company's performance on the basis of their experiments. They can easily decide which stock has to buy. Where the manager of fund sees the equity fund also sees that how much fund is required for every stock. The fund manager must maintain specific fun in every stock for the time need. And equity fund must have reserve back in the shape of cash. And moreover the mature investor must look the annual reports of the company which is published annually to check out what companies has chosen fund manager for investment and also look after about how much. The fund from the small venture owners themselves and from other people. So the stock holder of the company buy share from the company and make financing. So the small venture owners invest their own resources in their venture. Small venture owner gain to loan from other, saving and even sometime the small business owner use their personal assets in the business for serving financing. So if you make a huge contribution to the company financial statement it helps to encourage your investment and money lender and investor as well. So in other case if you are a small venture owner and you cannot make a huge financing by sing his personal resources. So you have to say for loan. So it is say that if someone want to make a financing a lender or investor must have a contribution approximately 25 to 50% in equity financing. Because mostly investor look the risk and benefits of his investment which is going to invest. So that the more beneficiary sources of small venture financing is friends and family can operates its operation very well. (http://sbinfocanada.about.com).
Common Miss Peelings equity finance, equity financing. Example Jana require equity financing for her catering venture and fortunately Jana find a partner who was ready to devote your fund and experience as well.
PRIVATE EQUITY FIRMS:
Private equity firm is IST like a venture organization which issued securities for earning profit, and these securities are only traded privately not on stock exchange. So that private firm is not attached to purchasing and selling company for short term profit. But private equity firm sometimes.
EQUITY SHARE:
Equity shares means the buyers have an ownership right of share or stock in the company. The holder of the share have right of voting in the company. The shareholder can use his vote in the company boards of director's selection. The shareholder can attend company meeting as well and give an opinion. Share means what contribution to the capital of the company. Equity share are always equal distribute to the total capital of the company. What total contribution has made by small and big investor check through equity share. Or what investment has made by small and big investor in total capital of the company. The people who had a equity share of the company are called shareholder of the company. So that why equity share are normally issued by the company for buy by shareholder to be one become the owner of the company. So the profit on equity share is normally depends on company ability. Mean how much the company earns through equity shares. If the company earns the large margin so that the profit not directly distributed to the shareholder of the company. But the profit transfer to equity shareholder in the shape of dividend. So we have already discussed an equity shareholder having a voting option in the company. And gives a good idea for emerging markets or provide better information or idea for effective decision making. (www.surfindia.com).
EQUITY FINANCING:
Equity financing means received money by issue of common stock or preferred stock to the investor. (www.investorwords.com)
Equity financing means the company gets make a contract of purchasing and selling for a long term investment. So private equity firms not formed by a group of investor or the person who have the same vision. This sort of firm can begin with a single project. As the project begins the output return. Partners must have a look the same business to continue the operation of the firm for profit making. According to the partner aims the firm sees the same venture or different types of ventures or divides their interest to include several different sort of investment scheme. So for this purpose the private equity firm use different sort of investment approaches. This is written below one by one:
LBO leverage
In this approach the partner use the financial leverage to purchase or hire a venture from the current share holder and divide the hire share between the partners. This sort of approach is approach leads when the partner purchase a venture may be the business going to be solvent. And the current partner may be helpful for generating a equitable profit for the company. (www.wisegeek.com)
Another approach which is used in private equity firm is to supply the business capital to the newly formed business. The main purpose of supplying business capital to new business is to get profit at later date. This sort of investment treats as a long term investment and the partner does not expect the better return for an extended period of time.
Another approach that is use in private equity firms is growth capital expending. Expending growth capital is not provide capital to the company or not reduced to buying company give a exchange for sale and also give knowledge about loan capital means your loan capital will be repaid at future date or not. The main purpose of the private equity firm is to provide a good return to everyone who directly attached to the company. This operation is beneficiary for everyone. So everyone has chance to grow himself and do work in the favor of the company. And it automatically becomes a strong firm. Also the partners have choice to give and select projects that hold the potential to generate a greater deal of wealth for everyone concerned. (www.wisegeek.com)
PRIVATE EQUITY FIRM PERFORMANCE:
What drives private equity fund performance?
The performance of private equity firm should be measure due to different kind of activities which is take place in private equity firm. The private equity fund has received now the two factors due to this the performance of the private equity can be measure. First the amount which we have accepted to US private equity debt now has increased from $5billion in 1980 to $300 in 2004 total amount over 1trillion previous 25 years. Second is the person who manage the equity fund called fund manager play a crucial part or now the fund manager give a strategic role in the company which they make financing.
The private equity firms have a great impact in both sector investment and economic growth of the company. So due this impact the investor must reach to the problem of the company which is apparent. According to the paper of Gompers and Lerner (2001). Gompers and Lerner say we must know about the risk and rewards of the firm means what we do not know about business capital. This statement also falls in the Leverage LBO investments strategies. (http://fic.wharton.upemn.edu)
The main purpose of this paper is found out the risk about return and the other factor which affects the performance of the firm. We are sure about this paper which is shows that is not only interesting for the allocation of portfolio and also the beneficiary for the research which is recently done. Which shows that the performances of the private equity funds have comparatively low performance? For example: according to the Kaplan and Schoar (2005) says in their model. This model shows that the performance of the private fund is relatively math with the performance of S and P 500. According to this statement the huge part of money invested in LBO which is typically more than S and P 500. This shows the reasonable profit in LBO investment. And the remaining fund invested in the business capital.
Moreover Phalippou and zollo (2005) shows that the model selected by Kaplan and Schoar (2005) includes. Suspicious funds and shows that the performance actually the law of S and P 500.
Moreover.
For the valuation of performance of a private equity we must know the business cycle and stock market cycle by using the CAPM method.
We must go for it. We must check the economic circumstances when we go for investment. We find out the GDP interest rates etc. (http://fie.wharton upemn.edu)
PROBLEM STATMENT:
Investor puts private equity to their portfolio for getting effective frontier and a bigger sharp ratio. If we look at previous ratio which shows that they provide equity giving the average return on investment in general public market. If you are take a review of previous performance of a private equity firm. There are two types of factors could be analyze.
If the private equity fund gives a medium return of funds it shows that private equity is underperformed in public market. So there is a vast dispersion between higher and lower quality return in public market. So which investing we must have to select the top management and we must select the educated and professional manager when we go for investing.
AIMS AND OBJECTIVES:
Know thoroughly learned the history of private equity.
Learn why people make financing and why people invest in private equity firm.
After getting the information or after thoroughly study of equity firm. Make analysis who the private equity performing in the market.
RESEARCH QUESTION / HYPOTHESIS:
Pakistan with its limited institutional private equity activities offers long term capital appreciation.
Pakistan with its limited institutional private equity activities does not offer long term capital appreciation.
CHAPTER#03
RESEARCH DESIGN:
Here is not enough information or data available on related topic or performance of a private equity firm. I have really go for all types of materials. My search is based on every type of resources to make a good contract regarding this research. During this research I have collected data from different kind of resources during this process I have use deductive approach which help me to lead my research or arguments.
DATA COLLECTION METHOD:
During this research I have collect the data for my topic from different sources. Basically I have use secondary source of data for my thesis. The data very effective and small but also a tuff data available in my research. For this purpose I have also been direct access to my related topic. I have also discuss with my friends, claques, seniors, teachers, guardians and etc. during this research I have often visit this sort of specific firms and get reasonable and related information from the employ of the firm like manager accounts performance of the sort of firm funds manager I have meet that person who directly related with the firm.
REVIEW OF LITERATUE:
During this search I have reviewed a published literature, work on interest, read books relating to this topic and get information according to the particular subject area within the specific time period. Literature review is IST like the summary of the sources. Means who you got the sources for your thesis. Literature review is also known as business organization pattern and combines both summary and synthesis.
Summary give us to a recap of every important information about the sources. Which we have used during this search. And the synthesis is the way in which the related information is organized and reshuffling within a specific subject and related to the area of study. Synthesis matches the old information and gives a new picture of the search. Literature review is IST like a lecture summary of the whole research so its helps to the research relating to the particular research topic.
METHOD OF ANALYSIS:
During my research first I have collect the data relating to my topic and differ collection of data. I have use the method for make an analysis the collective data for the purposes of getting the fair result about my topic.
ETHICAL ISSUE:
During my whole research I have did a respect of esthetical issues. Because esthetical issues directly affects your performance and your level of dignity. I really sincere with my topic. So that why I did not perform any sort of unmethodical activity which is directly effects to my research. A good ethic behavior makes our research more attractive and more aggressive. I should respect the rights of individuals. Following are the points which are written below I have concerned during my research:
I must try to go for relevant person.
I am not tried to put this sort of question which make me uncomfortable.
I must try to contact the relevant people.
Written a reasonable time.
I have contact the people within its free time.
I have not tried to give any answer to question etc.
TIME SCALE:
For this purposes I have spent my time for the completion of this search that are:
I have spent 1 week for the collection of data and knowing about what the private equity firms are?
Means for introduction
Introduction and collection of data 1 week.
After collection of data I have review different sort of literature through net, published literature, books etc for this purpose I have spent 1 week also for this review of literature.
Review of literature 1 week.
After collection of data and reviewed of literature I must have to organized the collective data and then make analysis which I have been collected is related to the particular area of study or subject or not or the collective data give a true and fair view relating to my search. So for this motive I have spent 2 weeks because analysis is a very long process. Here is need of different kind of techniques and it's not an easy task.
Analysis and organize data 2 weeks.
After analysis of the data I must have to go for final draft after checking every step and every information and data has up to date. Then I have made a final draft of my thesis within ideas.
Final draft 1 week
So my thesis have complete within 5 weeks. I have totally spent 5 weeks for my search.
ANALYSIS AND RESULT:
after getting the relevant data I have analysis the data for different ways on the basis of the analysis. I have given the explanation for result or on the basis of the analysis I have made a result.
CONCLUSION AND RECOMMENDATION:
Conclusion after the completion of first four chapters. I have give a conclusion or final summary about my thesis and for recommendation. I have presented the more information in my topic.
THANKS.
CHAPTER#4
ANALYSIS AND RESULTS:
During my research I have analysis the country of Pakistan for every prospective relating to my topic "performance of private equity firm". According to my research Pakistan is the sixth great famous country in the world with population of 175 millions. Pakistan bounded by India, china, Iran, Afghanistan. It is strategically situated and it access to a long coastline along with a Arabian sea. So that Pakistan has a approximately growth rate 3%. And the analysis has make an idea about population of Pakistan will be 240 million till the end of year 2020. Now the Pakistan has showed the real picture of macroeconomic I mean to say Pakistan economically has become a stable country. Pakistan has improved the economy over the last five years and it is expected that Pakistan has stable its growth momentum. Because the sixth most famous country of the world Pakistan has increased its "GDP" by 6.6% in the fiscal year which is ended on 30 June 2006. And it said that Pakistan will increased its "GDP" from 6.6% to 7% to 7.3% for fiscal year 2007. It will a great improvement in the economy of the Pakistan. It will create a good image for the betterment of Pakistan economy activities. So we can relate this economic growth regional trend. So here is early in 1999-2000 Pakistan was lagging regional average "GDP" growth in 2001. The economic reforms institution has started take effect and then Pakistan has started gain economic growth in the 2003 and so on. Even due the high purchase price of oil the Pakistan has produce the GDP growth rate relatively higher than the estimated average growth rate of Asian average prediction of 5.8%.
GDP COMPARATIVE:
The government of Pakistan says that the per capita income of Pakistan has been increasing day by day at an average rate of 13.5% per year for last 3 years ago. This growth shows that stability in economic condition I mean Pakistan macroeconomic picture has really improved. Due to improve in economic condition Pakistan improving its per capita income and "GDP" growth rate as well. The Pakistan per capita income in the fiscal year 2003 was US $579 and now due to economic stability "the Pakistan most sixth famous country in the world" has increased in per capita income from US $579 to $736 in 2005and $830 in fiscal year 2006. In 2006 the Pakistan per capita income on purchasing parity basis was $ 2590. So due to the vast change in Pakistan per capita income ang foreign exchange conditions and "GDP" growth rate. Now we can say that the Pakistan economic picture shows a positive colored. Pakistan improving economically day by day I mean to say. Later on in addition the improvement in Pakistan current account which shows surplus and strategically increment in current reserve. The government of Pakistan has an opportunity to repay its big debt liability by using this surplus or can prepay high expensive debt. Later on the worker remittance also has increased 400%. So the government of Pakistan received a debt relief from international lender for reducing or minimizing external debt. The government of Pakistan has minimized its debt from $ 47 billion to $ 38 billion in the fiscal year of 2006-07. Later on I have discussed government of Pakistan using surplus for prepay of debt and also gain loan at a very low price of interest. This low interest rate showing positive credit rationing in Pakistan. So the government policy refers or the government of Pakistan willing for widens net tax. The government of Pakistan working to improve the balance of trade between particular sectors. The government of Pakistan privatizes the public sector for this purpose the government establish the institution for the well being of this sector which provide all sort of information to willing sector. For this purpose the government of Pakistan has received a positive reaction from the IMF "World Bank". The international monitoring fund and nation development bank helping to improve the credit rationing of Pakistan currency from standard and par moody.
VENTURE CAPITAL AND PRIVATE EQUITY OPPURTUNNITY:
Pakistan with its limited international private equity activity offers long term capital. Means to say if an investor private equity gives a long term loan appreciation through investment in undervalued company's during its catch-up growth rate. So due to the vast change in economic condition of Pakistan the private sector has grown up. The performance of private sector is acceptable. So due to change in environment the private investor can invest their income in different sectors or enjoying the particular characteristic. Which is written below one by one: (www.altassts.com)
High growth which demons ratable pent-up demand in domestic market.
Sustainable growth prospectus
Market liquidity managerial and administrative activity strategy sale.
High quality management support
Low cost in international market
EXAMPLES OF SUCH SECTORS INCLUDE:
MUNUFACTURING SECTOR
The sector like manufacturing specially textile and leather are those sectors in which the Pakistan has a big name in the international and national markets. Because Pakistan has a monopoly in textile and leather sector. There is no competitive available in the market against these specific sectors. So Pakistan takes benefit and enjoys the competitive low cost. And due to vast production Pakistan enjoy the trade conditions.
OUTSOURCING:
The sector of outsourcing also includes in this business. Pakistani companies hire skilled and well speaking people at very reasonable packages. Which uses their skills in the international markets.
ENERGY SECTOR:
Most of the sector has become privatize so due to the rapid change in the private sectors performance the energy sector suffering from a long term deficit by rapidly increasing demands.
TELECOMMUINICATION:
Pakistan telecommunication sector recently has become privatize so that the Pakistan has the fixed line teledensity is only 3.6% with mobile teledensity of used 10 %.( PTA August 2005).
TRANSPORTATION:
Transportation sector (buses, truckin and car leasing) that is fragmented and undercapitalized which support in the emergence and consolidate the firm.
FOREIGN DIRECT INVESTMENT IS RISING:
If you want to see the liquidly of Pakistan in external market so you can check the validitation process of Pakistan I external or outside Pakistan through "FDI". According to "FDI" reports the Pakistan has received $3.6billion in the year of 2006 and in 2005 $1.7 billion. So in Pakistan there is number of institutions which contribute their investment. So the Pakistan board of investment says that the communication sector is the largest recipient sector in the Pakistan with the figure of $ 1.9 billion. The other sector like power $ 320 billion. The financial institution receives investment at $ 329 billion. So following are the figure showing the foreign direct investment trends in Pakistan which is written below. The ministry of IT and telecommunication says that the single sector should have to receive investment approximately at $ 13 billion in the next 3 to 5 years.
PAKISTAN CREDIT STANDING IS IMPROVING:
