PROSPECTS OF FOREIGN INVESTMENT BRIGHTEN
Phenomenal investment plans by various Dubai groups in property and industrial projects signal the dawn of a new era of foreign direct investment flow into Pakistan.
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Mar 26 - Apr 01, 2007
Due to the consistency of liberal economic and pro-investment policies, Pakistan is attracting foreign investment which is likely to exceed $ 6 billion during the financial year 2006-07. Over-optimism prevails in the Board of Investment, which estimates that by the close of the financial year, foreign investment may be around $ 7 billion.
The financial year 2005-06 ended up with an investment of $ 3.5 billion, which included over $ 1 billion as privatization proceeds during the year. During the current year, however, authorities believe the share of privatization proceeds in the expected FDI of about $ 7 billion would not be that high.
According to a recent report of the World Bank, Pakistan has emerged as second best country among eight South Asian countries for investment. The report compares business regulations of eight countries of the region with 175 countries of the world. Maldives tops the list, followed by Pakistan, Bangladesh, Sri Lanka, Nepal, India, Bhutan, and Afghanistan. Their global ranking is 53, 74, 88, 89, 100, 134, 138 and 162, respectively. A number of factors such as the procedures of starting business, dealing with licenses, registering property, paying taxes and creating environment for doing business were taken into consideration while compiling the report.
The second ranking for investment is certainly because of the consistency and liberal policies adopted by the government over past more than seven years. In addition, a comparatively better ranking of Pakistan is attracting foreign investment that is likely to be around $ 6.0 billion by the end of the current fiscal year. Domestic investment has also shown positive growth over past four years.
The prospect of foreign investment in Pakistan has brightened partly due to the world political situation but mainly because of the persistent efforts of the government starting from President Musharraf down to the Chairman Board of Investment to prepare Pakistan and present to the world investors as one of the best country for safe investment with the promise of higher returns on their investment. President Musharraf and Prime Minister Shaukat Aziz have undertaken extensive tours of promising countries to market Pakistan's potential in different sectors. They have specially focused on Middle East, UAE, Kuwait and Saudi Arabia and highly succeeded in their efforts as is indicated by the numerous initiatives of the rich investors from these countries during the last few months.
President Musharraf, chairing a high-level meeting in Islamabad in September last year, gave a target of $ 27 billion FDI during the next five years. Replying to a question as to how the board planned to achieve this target, Mr. Riazul Haq, the Director General Board of Investment, observed that the target sounded high but it was achievable with little extra efforts and vigilance. The yearly target comes to about $ 5.5 billion and the board is of the view that with full support of the President and the Prime Minister, "we can meet the expectation". The board has started planning in this direction.
The Prime Minister directed the BoI to remove all impediments in investment, domestic and foreign, especially in the areas of land acquisition, provision of utilities and facilitation at the provincial and local levels. The Minister for Privatization and Investment was asked to visit the provinces and review the functioning of the provincial investment committees and suggest areas for reforms in functioning and deregulation.
The BoI has also launched a campaign through Pakistan embassies in leading countries of the world to personally contact 20 to 25 top-level companies working in different sectors and invited them to Pakistan to see for themselves the lucrative business/ investment opportunities in this country. The BoI has compiled a profitability chart of over a dozen foreign companies operating in Pakistan in different fields covering the past six years. The yearly average of profit ranges from 17 to 88 percent. These figures are lucrative enough to attract foreign investors. Continuity in policies, fiscal reforms, deregulation and emphasis on private sector, liberal investment policies pursued by the present government and its focus on improved governance have helped a lot in gaining the confidence of the foreign investors.
The DG, BoI mentioned the following steps taken by the government in pursuance of its liberal investment policy.
a) Equal treatment to local and foreign investors.
b) All economic sectors open for FDI.
c) Foreign equity up to 100% allowed.
d) No government sanctions required.
e) Remittance of royalty, technical and franchise fee and profit allowed.
f) Foreign investment fully protected.
THE BOI IS FOCUSING ON THE FOLLOWING COUNTRIES FOR THE FDI:
China, USA, UK, Germany, Italy, France, Saudi Arabia, UAE Oman, Qatar, Kuwait, Sweden, Finland, Netherlands, Denmark, Norway, Austria, Belgium, Spain, Australia, Japan, South Korea, Malaysia, and Singapore. The priority sectors for the FDI are oil and gas, power, IT and telecom, agriculture, mining, SMEs, infrastructure and tourism. The BoI is convinced that if the present policies continue with firm monitoring of the work of the committees at the prime ministerial level and the law and order situation is further improved then the target of $ 27 billion FDI would easily be achieved by 2010.
In view of some initiatives taken by UAE companies of the world repute in the construction sector, it seems that the target of 27 billion given by the President by 2010 would be exceeded by a big margin. The Economic Coordination Committee of the (ECC) Cabinet, in its recent meeting, approved a plan submitted by United Arab Emirates-based firm Emmar having a worldwide presence to build a model city in Karachi with a total investment of $ 43 billion during the next 10 to 13 years. Pak Gulf Construction Company, a joint venture of Saudi and Pakistan investors, has already stared work on a huge construction project in Islamabad involving an investment of about $ 2 billion.
Leading Dubai business groups, including Emmar and Dubai World, announced their investment commitments totaling more than $ 30 billion which along with some $ 4 billion investment already committed by Etisalat and DP World recently will account for nearly one third of Pakistan's gross domestic product (DGP) of $ 118 billion. This phenomenal investment plans by Dubai groups in various property and industrial projects also signal the dawn of a new era of foreign direct investment flow into Pakistan which last year attracted only $ 2 billion.
Besides, the United Arab Emirates has shown keen interest to invest in power sector in Pakistan as announced by the UAE Minister for Energy Muhammad bin Dha'er al Hamili during his visit to Pakistan last year. In his meeting with Minister for Water and Power Liaquat Jatoi he termed Pakistan a country of high economic growth, which was emerging as a potential market in the region. During the meeting, both the sides agreed that there should be continuity of such meetings to early finalize the investment projects. It was also observed that the power sector had great potential and viable future for making profitable investment in Pakistan as the demand of power had registered an increase of 10-12 percent in the country. There is also great scope of investment in water sector as the government is going to construct mega projects.