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UAE’s enhanced investment in Pakistan attracts global FDI

The recent announcement by the United Arab Emirates (UAE) to enhance its investments in Pakistan will help attract global Foreign Direct Investment (FDI) and accelerate economic growth in the Asian country. UAE has already invested around $6 billion into the country. It will continue to explore ways of strengthening investment and business relations with Pakistan.

Pakistan is the UAE’s strategic partner and its government and workers have participated in the development of the UAE and its institutions. Among the seven GCC countries, the UAE is the biggest investor in Pakistan. From 2004 to 2010, its public and private sector investments totaled $3.74 billion.

Several key companies such as Emirates National Oil Company, International Petroleum Investment Company, Etisalat, Al Ghurair, Abraaj Capital, Dana Gas, Emirates Investment Group, Emaar, DP World, Julfar, Arabian Packaging Company and others have invested in Pakistan.

Abu Dhabi’s investments in public, private and joint venture projects are growing. Pakistan wants China to join in financing the $51 billion China-Pakistan Economic Corridor. Vast UAE foreign direct investment and joint ventures have been operating successfully in Pakistan for years. A large number of high-dividend FDI investment and joint venture opportunities exist in Pakistan. These include sectors such as infrastructure development and expansion, power generation and distribution networks, water resource development and desalination, farm-based industries, fresh fruit production for export and export in packaged form to destinations such as the UAE and Saudi Arabia. Shaikh Nahyan’s comments have generated enthusiasm in the financial sector and among investors in Pakistan.

The UAE and Pakistan will chart out new avenues of cooperation and joint ventures. UAE believes in Pakistan’s economic growth and potential. It will strive to offer high dividends to investors from Abu Dhabi and other GCC countries. The United Arab Emirates announced plans to invest 600 billion dirhams ($163 billion) in projects to generate almost half the country’s power needs from renewable. “Pakistan aim is to balance its economic needs with environmental goals”, Prime Minister Sheikh Mohammed bin Rashid al-Maktoum said on Twitter as the Gulf state unveiled its Energy Strategy 2050.

The UAE is a top oil exporter, but has taken steps to reduce its dependency on fossil fuels to generate power, including building nuclear facilities. The country’s energy mix by 2050 will comprise 44 percent from renewable, 38 percent from gas, 12 percent from clean fossils and six percent from nuclear energy. The plan aims to increase usage efficiency by 40 percent and increase clean-energy contributions to 50 percent.

In June, Dubai announced plans to build a 1,000-megawatt solar power plant by 2030, the year it aims to turn to renewable energies for 25 percent of electricity needs.

In 2014, Abu Dhabi opened the world’s largest operating plant of concentrated solar power, which has the capacity to provide electricity to 20,000 homes.

Dubai-based private equity firm Abraaj Group made an investment in Pakistan’s top cinema operator, Cinepax, to drive expansion over the next four years. Abraaj will help Cinepax in developing 80 new screens across multiple locations, the private equity firm said in a statement. Cinepax will also develop other entertainment-related ventures, the statement said, but did not reveal the value of the investment. Cinepax, which launched its first multiplex in 2007, has since established itself as the market leader in the country, boasting 29 screens in 12 locations.

 

Pakistan’s current low ratio of cinema screens of 0.5 per million people and the possibility of revitalizing the local film industry presents a compelling investment opportunity.

The investment will help build confidence among international investors about the Pakistan film industry.

Cinepax marks Abraaj’s ninth investment in Pakistan spanning a number of sectors including healthcare, power distribution, renewable energy and industrials. Abraaj, which bought a majority stake in 2009 in power utility K-Electric, agreed in October 2016 to divest the 66.4 percent shareholding to the Shanghai Electric Power Co Ltd for $1.77 billion.

Hascol Petroleum Limited has sold its 15 percent stakes to Vitol Dubai Limited at $27.92 million, said the company in a stock filing. The Dubai-based international marketer of crude oil and petroleum products has bought over 18 million shares of Hascol which’s shares appreciated by 0.89 percent on Pakistan Stock Exchange. The gain was attributed by JS Researchers to the material information the Hascol disseminated in the market.

Pakistan would be pleased if the UAE could benefit from the CPEC project, as it was a good situation for all countries in the region.

According to the Pakistani embassy in UAE the ambassador stated this in an interview. He spoke about how both countries could benefit from the China-Pakistan Economic Corridor (CPEC), a part of China’s ambitious One Belt, One Road multi-billion dollar initiative, and also part of Pakistan’s Vision 2025. The envoy said that Pakistan and China were working on huge projects on infrastructure, roads and railway networks. Most importantly, both countries are also investing in the energy sector. He described it as an ideal investment opportunity for Emirati investors. He noted that the UAE was the second largest Gulf Cooperation Council (GCC) trade partner of Pakistan, with a trade surplus of US$5 billion.

Moreover, Pakistani nationals send US$4.5 billion in remittances each year from the UAE to their home country. The UAE is already one of the main investment partners in Pakistan. In fact, according to some estimates, it is the third largest investor. There will be huge opportunities coming from this project, for all countries of the region.

In the last few years, UAE companies have invested billions of dollars in all major sectors, particularly banking, infrastructure and communications. These sectors provide ample opportunities for further investment, as Pakistan’s fast-expanding economy expects to achieve 5.5 percent GDP growth this year. Pakistanis invested $8 billion in Dubai real estate in last 4 years.

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