Sep 8 - 14, 2008

After remaining dormant for over 10 months, the inflow of foreign direct investment (FDI) during July, August the first 2 months of the current financial year woke up finally. The FDI inflows in these months showed an improvement and country recorded an increase of 40 percent to $340 million in the month of July of the current fiscal year in comparison to $193.5 million in July last fiscal year.

The government has received encouraging responses after the conference of the international investors held in Washington and addressed by the Prime Minister Syed Yousaf Raza Gilani on the eve of his visit of USA last month. The Prime Minister had invited international investors and international financial institutions to join Pakistan and invest in the development of country's energy resources especially in the huge coal reserves. The second sector which promised attractive return to the investors was housing and infrastructure, he said. It was followed by another conference of investors which was addressed by Sindh Chief Minister Syed Qaim Ali Shah who specially briefed the investors about the high potential investment opportunities in the development of huge reserves of coal in Thar for use of electricity generation at a comparatively much cheaper cost. He offered joint venture with full security of investment with an attractive return on a long term basis. These conferences and meetings have proved successful as many investors have shown interest to invest in energy sector. The authorities in Pakistan are expecting sizeable foreign investment in this sector and hope that FDI inflow in this sector may start within the next few months.

According to the latest figures released by the state bank of Pakistan recently, FDI inflows recorded an increase of 40 per cent to $340 million in the first month of July of current fiscal year over the corresponding month last year. It reported that the telecommunication sector proved to be the most popular sector for foreign investors as it received the lion share of $147.7 million in the month under review as against the $27.2 million in the same month last year. The country had attracted highest foreign investment of $1.626 billion in the communication sector in 2007-08 while the telecom alone pocketed $1.440 billion of the total. Despite imposition of duty on mobile phones in the current budget, its import has not shown any decline.

A senior analyst predicts that the telecommunication will receive much higher foreign investment this year as the government wants to divest its stakes in the Pakistan Telecommunication Company Limited (PTCL). He said the government still possessed about 60 per cent of the company.

The financial sector, which attracted $1.608 billion in 2007-08, received $43.4 million in July 2008 against $28 million the same month last year. Analysts said most of the in-flows of foreign investment in the banking sector were because of the merger and acquisitions. NIB Bank and Barclays have entered the country with hope to find the potential for their growth. They said more investment was expected as the banks would go for expansion. Bankers said more local banks could be sold out to foreign buyers which would boost the foreign investment in the financial sector. The government is likely to launch Global Depository Receipts of UBL and HBL in the international market to fetch badly-needed foreign exchange.

Oil and gas exploration sector attracted $37 million in FDI in July 2008. It fetched $635 million in foreign direct investment in 2007-08. The government has significantly increased the wellhead prices of oil refineries and gas fields which may woo more foreign investment. "The beginning is encouraging but the inflow of FDI depends on the policies of the government which currently is busy at the political front paying little attention to the economy," said a senior analyst.

Speaking at the round table conference of international investors on Pakistan power at the World Bank premises in Washington on July 29, Prime Minister Gilani invited international investors and financial institutions to reinforce their partnership with Pakistan in the field. He was speaking at a Roundtable on "Pakistan Power" at the World Bank, which was attended by leading entrepreneurs and senior representatives of international financial institutions. Outlining the country's strategy for development of the energy sector, Gilani said it envisions the exploitation of hydropower, development of coal reserves and renewable energy resources, increasing emphasis on nuclear energy resources, accelerating production of indigenous oil and gas reserves, import of gas through various alternatives, encouragement of CNG, LPG and import of LNG to meet gas requirements and achieving energy efficiency. "We firmly believe that the private sector will be the engine of future growth in power generation in Pakistan. For this, we will continue to push forward all alternatives for investment in the sector: public, private and public-private partnership," he said.

Minister of Information Sherry Rehman, Minister of Water and Power Raja Pervez Ashraf, Chief Minister Sindh Syed Qaim Ali Shah, Advisor on Economic Affairs Hina Rabbani Khar and National Security Advisor Mahmud Ali Durrani also attended the event. Pakistan's energy requirements have been increasing recently and the 165-million strong nation is striving to overcome shortages to sustain industrial and agricultural growth. In his address, the PM informed the participants that Pakistan is endowed with huge reserves of coal including the Thar coal reserve of 175 billion tonnes spreading over 9000 square kilometers. The quality of Thar coal is similar to coal in other countries and is equally suitable for power generation of around 100,000 Megawatts annually.

He said the government had already put in place the Energy Board for taking policy decision to harness this huge potential. The PM said the government is reinvigorating privatisation of existing public sector entities in the power sector. "Pakistan now has a well-tested policy framework for private investment that guarantees fair returns, security of investment and internationally recognized dispute resolution mechanisms," Recent enthused response from the international investors to Pakistan's bids for 1000 megawatt power generation is a clear manifestation of market confidence in the government's policies in the sector, he stated.

Speaking at a conference of investors and financial institutions Sindh Chief Minister Syed Qaim Ali Shah invited the international companies to make investment in coal-fired power plants and other projects in the province assuring them of full support of his government. "I will extend warm welcome to all those interested in having a look at Sindh's coal resources, especially the desert of Thar and its coal reserves for establishing power generation plants or for other purposes. As chief executive of the province, I extend my full support and assistance to prospective investors in coal resources of Sindh. We will also provide full access to all data and information available with provincial concerned departments", he said in his opening address at a roundtable conference at the office of the World Bank.

The Thar coal lignite reserves were estimated to be around 175 billion tons spread over an area of 9,000 square kilometres. The total coal resources in Sindh are estimated to be over 185 billion tons, considered sixth largest in the world. Over 90 per cent of country's coal reserves are in Sindh, he told the participants. He further stated that the government had facilitated infrastructure development at Thar coalfield where road network, electricity, optical fiber line, water supply, etc., are available while airstrip is being built and laying of a railway track has been approved.

"The mines department of Sindh has intensively explored an area of 455 sq km and further explorations are being undertaken to increase availability of blocks with complete data for potential investors," he said. Syed Qaim Ali Shah informed the participants about the response from both local and foreign investors to an offer for public-private joint venture in Thar coal-mining. "They are enthusiastic and there are several investment proposals under consideration of the government. Some of the companies are participating in this conference. "We have now formed Thar Coal and Power Board to ensure that the investors do not run for paper work from one department or ministry to other, and provide one-window facility to them.

"The large area of Thar coalfield cannot possibly be developed by a few companies. The existing energy gap and future demand makes it imperative upon the Sindh government to open up its coal resources for country's needs. "Coal has to be exploited at a very large scale for meeting the energy demands of the country. This includes demand for electricity as well as for fuel through coal-to-liquid technology and by gasification to conserve the fast depleting reserves of natural gas of Pakistan," he said. The Sindh Chief Minister said that development of Thar resources would provide certain degree of long-term energy security to Pakistan. Over 36 companies from all over the world attended the conference also addressed by Foreign Minister Shah Mahmood Qureshi, who also holds the charge of ministry of petroleum and natural resources.

Chairman china mobile, after his meeting with Prime Minister Gilani visit to china two weeks back on the occasion of Olympics announced that China mobile would invest a further $800 million in Pakistan. Prime Minister Syed Yousuf Raza Gilani held a series of meetings with Chinese corporate leaders, including Wang Jianzhou, Chairman of China Mobile, Jin Kening, President China National Chemical and Engineering Corporation (CNCEC) and Levin Zhu, Chairman China International Capital Corporation (CICC) during his visit to China. Chairman China Mobile announced investment of a further $800 million in Pakistan during this year. The Prime Minister welcomed China Mobile's continuous interest in Pakistan and assured its chairman of his government's full support in expansion of the company's operations.

During the meeting with Chairman CNCEC, the Prime Minister appreciated China National Chemical and Engineering Corporation's $900 million investment by way of operating 8 to 9 plants in fertilizer and PVC sectors in Pakistan. He urged the Chairman to expand his corporation's operations in the country. He also apprised Chairman CNCEC about Pakistan's large deposits of coal and urged him that his corporation should invest in the energy sector for electricity generation based on coal. In his meeting with Chairman China International Capital Corporation (CICC), Levin Zhu, who is the son of former Chinese Premier Zhu Rongji, the Prime Minister commended the able leadership of the former Chinese Prime Minister for steering China's great progress and development in economic and social sectors. He also lauded former Premier Zhu Rongji's contributions in strengthening of Pakistan-China relations and in particular the role he played in launching the Gwadar Project.