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Company Profile

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Saudi Pak: On strong track
Up-gradation of KVR by FWO


August 23 - 29, 1999

Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited has maintained the quality of its assets and improved financial health in spite of tough conditions in the banking sector. The Chief Executive of the Company, Muhammad Rashid Zahir said in an interview with the Pakistan & Gulf Economist. In accordance with its objective, he said, the company has been offering a broad range of financial facilities to the corporate sector. It provides financing to set up medium and large scale industrial projects in the private sector, participates in equity investments and also undertakes money market operations. The company carries on its business activities with the capital provided by the shareholders and is now supplemented by the funds mobilised from the national and international financial market.

To a question regarding the Company's growth strategy, Rashid Zahir explained that Saudi Pak has pursued the policies of prudent growth and high asset quality in the management of loan portfolio. Being conservative in approach and strategy, the company has consciously avoided the fast track. In spite of adequate capitalization and investment opportunities, it chose to grow at a pace which helped it to strengthen the asset quality. Side by side growing organically, Saudi Pak has acquired significant shareholding and management control of the former Standard Chartered Mercantile Leasing Company Limited jointly with two private sector business houses. Standard Chartered Mercantile Leasing Company Limited has since adopted the name of Saudi Pak Leasing Company Limited. Saudi Pak Leasing is the sixth largest leasing company in Pakistan. It had total asset base of Rs 2,076 million and equity capital of Rs 336.7 million as on December 31, 1998. The company is known for quality of its lease portfolio. It earned net profit of Rs.40.5 million and distributed cash dividend of 15 percent to shareholders for the year ended June 30, 1998.

On Saudi Pak's contribution to the economy, Rashid Zahir said that project financing is the core business of Saudi Pak. Since inception to December 31, 1998, Saudi Pak committed total financing of Rs 4,539 million to 197 projects,. comprising term loans of Rs 3.474 million and equity investment of Rs 1.065 million. Out of total financing, local currency accounted for Rs 2,799 million or 81.6 percent and foreign currency for Rs 675 million or 19.4 percent. The financing approved by Saudi Pak is spread over a number of key economic sectors including engineering, chemicals, fertilizers, telecommunications, sugar, cement and textile etc. As on December 31, 1998 manufacturing sector contributed 54.7 percent of the cumulative approvals, financial sector 26.0 percent, agro-based sector 6 percent, services sector 10.3 percent, and power sector 3.0 percent. The geographical dispersion of the cumulative term financing corresponds to the economic potential and industrial activities in various regions of the country.

In addition to meeting financing requirements of industrial projects, Saudi Pak encourages the institutions in the financial sector through co-financing, and extending credit lines to them for periods ranging from three to five years.

Giving background to the Company's funding requirements, Rashid Zahir said that for long terms need, Saudi Pak depends primarily on its equity capital originally provided by shareholders and retained earnings. He added that Saudi Pak mobilizes short-term and medium-term funds from the financial market. Islamic Development Bank, Jeddah has approved a funding line of US$ 10.0 million for medium to long term financing. During 1997, Saudi Pak mobilized medium-term funds by issuing Term Finance Certificates (TFCs) of Rs 300 million which carried tenure of three years and floating rate of return. Rashid Zahir continued that the funds mobilization was facilitated by high credit rating of the company.

Saudi Pak has been rated for its credit worthiness by two credit rating agencies, namely, DCR-VIS Credit Rating Company (Pvt.) Limited, an affiliate of Duff and Phelps Credit Rating Company of the USA and the Pakistan Credit Rating Agency (Pvt.) Limited, an affiliate of Fitch-IBCA. DCR-VIS has assigned Saudi Pak long-term entity rating of AA (Double A) and short-term entity rating of D1 (Dee one). The long-term entity rating represents high credit quality, strong protection factors and modest risk which may vary slightly from time to time because of economic conditions. The D1 short-term entity rating stands for very high quality of timely payment, excellent liquidity factors supported by good fundamental protection factors. PACRA has assigned Saudi Pak long-term entity rating of AA- (Double A minus) and short-term entity rating of Al+ (A-one plus).

To query on the operating performance, Rashid Zahir disclosed that in 1998, Saudi Pak approved long term financing of Rs 483.0 million which was 44.6 percent higher than Rs 334.0 million approved in 1997. The projects approved were sponsored by business houses with sound track record and contributed towards further improving the quality of loan portfolio. Being in the nature of catalyst, the long term financing approved in 1997 envisaged a total investment of Rs 366.0 million and creation of 2,059 new job opportunities. The annual value added in manufacturing by the projects is estimated at Rs 2,309 million.

Saudi Pak ensures timely disbursement of funds to its assisted projects in order to facilitate their completion within the approved time and cost estimates. The disbursements against term long financing stood at Rs 470.0 million in 1998, up by 57.5 percent over Rs 298.5 million in 1997. The cumulative disbursements were at Rs 4,323 million as on December 31, 1998 which include Rs 1,258 million equity finance and Rs 3,065 million against term finance.

The pursuit of conservative growth targets enabled Saudi Pak to develop a high quality loan portfolio over the years. Coupled with an effective monitoring of projects, a record amount of recoveries against long-term loans was achieved during 1998. The total recoveries amounted to Rs 493.4 million. The recoveries including instalments of principal and return on long term financing increased steadily during the last five years, 1994-98. Current dues collection ratio, which stood at 77.9 percent in 1994, improved steadily to 92.7 percent in 1998.

With regard to the financial results, the Chief Executive, Saudi Pak said that total income of the company increased to Rs 781.2 million and Rs.175. 1 million respectively in l998, as against Rs. 1003.0 million and Rs.230.4 million in the previous year. The decrease income was caused mainly by reduced opportunities in foreign currency business. The Company has geared up its operations to recoup the profitability by improving productivity in money market operations and equity operations, and at the same time, maintaining the asset quality of its loan portfolio.

Saudi Pak has paid up capital of Rs.2.0 billion which is contributed equally by the governments of two countries. As on December 31, 1998, the total shareholders equity amounted to Rs.2,530 million. The company is supported by a solid asset base, which amounted to Rs.10,132 million on December 31, 1998.

The capitalization of the company is moderately geared. The shareholders equity to total assets figured at 25 percent as on December 31, 1998. The short-term liabilities are matched perfectly with current assets. The company has never experienced mismatching of resources which leads to financial distortions. The liquid resources are parked with the banks against their quarantees and placed in deposits with the banks and leasing companies. Saudi Pak is poised to face the challenges inherent in a growing and competitive financial market by adhering to its objectives and pursuing conservative but forward looking policies.

According to Rashid Zahir, during the first six months of 1999, Saudi Pak has performed better than the like period of previous year. Over all financing approvals increase to Rs.1,155.5 million in January-June, 1999 from Rs.378.0 million January-June, 1998 and disbursement to Rs.358.5 million from Rs.249.0 million. Recoveries surged up 46.0 percent to Rs.437.3 million from Rs.299.5 million during the same period.

Saudi Pak's Head Office Building known as Saudi Pak Tower, is a landmark in Islamabad. It provides modern comforts and high quality of maintenance services to the tenants which includes most prestigious international organizations. Recently Saudi Pak Tower has been awarded ISO 9002 Certificate for the management, maintenance and leasing of the Tower with full services. At present, it is first and the only commercial office building in Pakistan to achieve ISO 9002 Certification.


Exploiting the Riches of Scenic Kaghan Valley

Up-gradation of KVR by FWO

By Lt Col (Retd) Manzoor Hussain
August 23 - 29, 1999

Pakistan — a Natural Tourist Destination: Pakistan treasures one of the most fascinating geographically, cultural and linguistically diverse land; enriched by five thousand years old history and civilization. It possesses, in its fold, abounding ingredients to make it a tourist destination on the world map. It is the abundant and unique landscape, however, that makes Pakistan more compelling to the adventure tourists and nature lovers: high mountains, plateaus, plains, deserts and the sunny beaches, are all found here. It is here, in the Northern Pakistan that the three mighty mountain ranges of the world i.e., the Karakoram, the Himalayas and the Hindukush meet. The region has the richest collection of the world's highest peaks: more than 700 rising above 6000 metres and more than 160 rising above 7000 metres. The Northern Areas boast of five of the world's highest peaks, rising above eight thousand metres: K-2, Nanga Parbat, Gasherbrum I, Broad Peak and Gasherbrum II. Found in these lofty ranges, are the valleys of unsurpassable beauty, dotted with serene lakes of crystal clear blue water, through which flow murmuring streams and springs, and thundering rivers. As the valleys rise, they give way to the huge rivers of ice — the perpetual glaciers; Karakoram being home to the largest glaciers, outside the Polar Regions.

The Scenic Kaghan Valley: Providing a relief from the extreme and harsh high altitude of the Northern Areas and Chitral, and, an escape from the feature-less, hot and unexciting plains, are two of the most captivating valleys of the region; Swat and Kaghan. The Swat Valley lies in the Hindukush, whereas, the picturesque Kaghan Valley, resembling Swiss Alps, is situated in the Western Himalayas. A part of Mansehra District, NWFP, the Kaghan Valley, stretches for 161 kms in North-Easterly to South-Westerly direction, with Neelum valley to its East and Kohistan District to its West, Diamer District dominating it's North and Mansehra and Muzzafarabad lying to it's South. The valley is Alpine in character, surface elevation ranging from 3220 feet at Balakot to 14,500 feet at Babusar Pass; the highest peak in the Valley being 17,390 feet high Mt. Malika Parbat. The rocks of the area are metamorphic to sedimentary in nature. The Valley is heavily vegetated, predominantly with Pine trees, except for it's Northern and higher portions. Climatically the Valley is cool and moist. In summers, the maximum temperature at Naran measures less than 20 C, whereas the minimum is around 3 C. During winters the temperatures are well below freezing. There is heavy precipitation during summers, specially in the months of July and August, whereas during winters it is moderate; the valley receiving snow fall ranging from less than one meter in the lower parts to more than two meters in its Northern and higher parts. Snow line during the summers is around 13,500 feet and descends to as low as 4,200 feet during the winters. Kunhar is the main river, which emanates from the Lulusar Lake and drains the valley from North to South into the Jhelum River.

Kaghan Valley is blessed with enchanting scenic spots, blue streams with trout fishing, waterfalls, large tracts of moderately high mountains, numerous trails, few small glaciers and several glacial lakes. Situated at a day's road journey from Islamabad, the valley is an ideal sojourn for domestic tourists during the summers. The route along the Kunhar River, boasts of scenic spots like Kawai, Kaghan, Naran, Batakundi and many others. Main camping and trekking areas at higher elevations are Shogran (7,730 feet), Mussa Ka Mussalla (13,370 feet), Lalazar (9,500 feet), Makra (12,749 feet), Sheran, Nadi Bangla, Ratti Galli, Katch Gali, Sri and Paye etc. The spectacular lakes of Saiful-Muluk (10,537 feet), Lulusar (11,286 feet), Dudipat (12,800 feet) and others at higher altitude provide soul searching solitude and tranquility that one can dream of. Major towns/villages along the Kunhar are Balakot (3,226 feet), (lying at the entrance of the Valley), Kawai (4,000 feet), Mahandri (4,952 feet), Kaghan (6,686 feet), Naran (7,963 feet), Batakundi (8,607 feet), Burawai (9,596 feet) and Jalkhad (14,267 feet). With richness in opportunities and potential for sightseeing, camping, trekking, lake-based activities, water and snow/winter sports, the Kaghan Valley has immense tourism value, both for the ordinary and adventure tourists; domestic as well as from abroad.

The deteriorated Kaqhan Vallev Road: The main communication artery to the area is the 238 kms long Kaghan Valley Road (KVR) which runs along Kunhar River and links Mansehra with Ghilas in District Diamer, passing over the Babusar Pass. A 48 kms long deteriorated road connects Mansehra with the gateway of Kaghan Valley — the historical city of Balakot. From here onwards a narrow 85 kms long metalled road winds along the Kunhar River, providing passage to Kaghan and Naran. The captivating town of Naran is further connected with barren Jalkhad through a 45 kms long wide truck-able track, whereas a narrow 60 kms long jeep-able track connects Jalkhad with Karakoram Highway at Chilas (3,300 feet) in Diamer District. It is an arduous road journey to the Valley through this narrow, poorly maintained and deteriorated road, the main impediment in exploiting the tourism potential of the area. Since long it was felt necessary by the Government to provide an all weather, sufficiently wide and metalled road link to the valley, thus opening the area to further economic growth. Development of good communication network is a prerequisite to economic prosperity of any region or country. The case in point is that of the construction of 755 kms long Karakoram Highway (KKH), aptly known as the Eighth wonder of the world. Cutting through the mighty mountain ranges of the world, ie, the Himalayas and the Karakoram, this highway provided an all weather truckable metalled link to the hitherto mountain locked, remote and backward region of the Northern Areas. Thus an epoch of economic growth and prosperity of the Northern Areas began, making tremendous impact on the quality of life in the area, which even the planners of the KKH could not have contemplated. It set forth a process of further development of communication infrastructure to the region's remotest corners. At the same time it served as a catalyst in increasing the inflow of tourists, trekkers and mountaineers to the area, multiplying manifold since 1978, when the KKH was completed.

Urge to upgrade Kaqhan Valley Road: Prime Minister Mohammad Nawaz Sharif, an ardent outdoor and nature lover himself, since long, was conscious to develop the infrastructural facilities in the Kaghan Valley, which could boost the tourists inflow and bring economic prosperity to this remote area. Further, the road can provide an alternate route to the Kel valley in the Azad Kashmir. It was only during his present tenure that the Prime Minister could fulfil and implement this important agenda. To construct the Kaghan Valley Road, the Government had to find an organisation, which had the capability and ability, to execute the gigantic task of cutting through the high mountains, widen and metal the road along the Kunhar River. It did not have to look far and abroad, Frontier Works Organisation (FWO) was readily available to take on this national project of priority and significance. Drawn from the Army Corps of Engineers, FWO was established in 1966, to construct the Eighth wonder of the world — the Karakoram Highway (KKH). The FWO, since then, has built a niche in the history of development works of the country. It now specializes in construction works ranging from tunneling, thermal / hydel power station, major earthen works to roads, motorway maintenance, airfields and other works requiring engineering skills and expertise. It has completed a large number of gigantic and important works of diverse nature and complexities, specially, in the areas where no other construction agency was willing to work.

Up, gradation - Specifications and Quantum of Work: The National Highway Authority decided to upgrade 170 Kms of the Kaghan Valley Road from Mansehra to Jalkhad in the first phase through project entitled Improve and Rehabilitate Road Mansehra-Naran-Jalkhad". The road design envisages upgrading the existing 4 metre wide road to two-lane, having Class 70 A2 load carrying capacity, with speed limits up to 50 Kms per hour and pavement thickness, at par, with the international specifications. In the rolling area the carriage way will be 8.1 metres wide, whereas in the mountainous section, beyond Balakot, carriage way will be 7.5 metres wide. This width includes one metre treated shoulders on either side. Lined drains will be provided in all sections of the road. Ruling gradient has been designed as 1:20, where as the maximum gradient will be 1:15. The quantum of work involved is colossal, as compared to any other project of similar nature in the country. Major quantum includes excavation of approximately 1.1 million cubic metres of common material, 2.5 million cubic metres of rock blasting and compaction of 1.14 million square metres of natural surface. Other major works include clearing, grubbing and removal of trees, stripping, formation of embankment for roadway, protective works and drainage structures etc. Construction of two bridges over Kunhar River, several other smaller bridges and culverts will also be undertaken. These project quantities, specially rock cutting, tend to increase as the work progresses, as has been experienced on KKH and other roads in the Northern Areas. The cost of the up-gradation project, which is being executed by FWO, is estimated at Rs 3.3 billion.

FWO at Work: Work on the rehabilitation, up-gradation and metalling of the Kaghan Valley Road, starting from the KKH (N-35) at Mansehra, connecting it with Naran and Jalkhad in the first phase, on the explicit orders of the Prime Minister. National Highway Authority, subsequently, concluded formal Contract Agreement with FWO. The Prime Minister inaugurated the construction work on the project on 19 June 97. FWO has employed one of its construction groups on this important project with adequate manpower, machinery, plant and equipment, so as to complete it within the stipulated time frame. It has employed a large work force comprising over 2000 all ranks to include officers, civil engineers, other ranks, plant operators, drillers, blasters, drivers, mechanics, surveyors, and, host of other tradesmen essentially required to maintain this large force of men and equipment. FWO has, presently, employed a large number of drilling, blasting earthmoving, construction machinery and metalling equipment. It includes 19 dozers, 6 motor graders, 12 loaders and excavators, 22 compressors with large number of drill machines, 12 rollers, two asphalt plants with carpetting equipment and a large fleet of dump trucks, tractor trolleys and other utility vehicles. The project area has been divided into four sectors by FWO. These sectors are described as under:-

Mansehra - Balakot (Sector - I): The road length in this sector is 40 Kms. The area from Mansehra to Gghi Habibullah, a distance of 28 Kms, is rolling and hilly, whereas from Garhi Habibullah onward it is mountainous. The work in this Sector is progressing well. The road alignment has been changed at several locations, removing the earlier kinks and bends with improved gradients, geometry, riding surface and speed limits. Batrasi hills, with crooked kinks and bends, have been bypassed through Jabba and Besian. Work on black topping of the road has started. From Garhi Habibullah onward, the alignment of the road is on the right bank of Kunhar River, overlooked by the rising mountains till the historical city of the Balakot is reached. Though there is not much room for changing the alignment in the area, work on widening and straightening of the road to the required specifications, through rock cut and improved road geometry, is in progress. One Engineer Battalion, with some additional troops, equipped with adequate plant, machinery and equipment has been employed by FWO in this Sector.

Balakot- Mahandri (Sector- II): The road length in this sector is 40 Kms. It is in this sector that the Kunhar Valley gorge begins and the valley finds itself squeezed between the high mountains that rise above 11,500 feet on either side. The road after crossing Kunhar, changes its alignment to river's left bank and attains altitude winding through the beautiful valleys of Kawai and Paras. From Kawai a narrow and winding road branches off to 7730 ft high Shogran, which is, however, not part of the KVR project. The mountains on both sides are dominated by the alpine forests, which add beauty of the area. The widening work in this sector is difficult, as a large quantum of rock drilling and blasting is required. The road geometry is being improved through straightening and widening the bends. Another Engineer Battalion, with additional construction, troops, equipped with adequate drilling machinery, earthmoving plant and other equipment has been employed on the up-gradation of road in this Sector. FWO hopes to complete the up-gradation work in this Sector by April 2000.

Mahandri - Naran (Sector- III): In this sector the 45 long Kms road moves close to the banks of the Kunhar River, attaining altitude gradually. The mountains on both sides rise high with alpine forests descending to the road side. Short of Naran, there are several spots where avalanches from the mountain slopes high above find their way to the road and the Kunhar River. The existing road though is in better shape, needs adequate realignment and up gradation before work on metalling can be undertaken. The work in this Sector has not yet started. FWO plans to employ an Engineer Battalion equipped with adequate rock drilling machinery, earthmoving plant and other equipment in this Sector also.

Naran - Jalkhad ( Sector- IV): The sector is served by 43 Kms long truck-able dirt track. Moving along the upper Kunhar the track passes through the villages of Batakundi and Burawai. Situated near Batakundi is the Lalazar camping site. At Burawai, the road moves on to the right bank of the upper Kunhar River. At Jalkhad the route bifurcates into two, one heading straight for the Lulusar Lake (11,266 ft), Babusar Pass (14,500 ft) and then onward to Chilas, whereas the other track leads to Nuri Nar Gali (12,962 ft) to Sharda and Kel (6,549 ft) in Azad Kashmir. Lot of effort is required to straighten the geometry of the track, widen its sub base and metal the prepared road. FWO intends employing a large sized work force to include an Engineer Battalion with additional manpower equipped with adequate rock drilling machinery, earthmoving plant and other equipment.

The Work Environments and Constraints: FWO is working on KVR under difficult and adverse work environments, and, under a number of constraints, which prohibit generation of full construction output by its work force. The rising altitude, coupled with atrocities of weather, make the work environment difficult, whereas spread of local population and compulsion to keep the traffic open during the course of construction, chokes the work progress. Some of these environments and constraints are:

Working Periods: Climatic conditions, specially, at higher elevations beyond Mahandri being snow bound, restrict the work periods in a year. Whereas the work up to Mahandri can be undertaken through out the year, the construction activities in sectors beyond Mahandri are restricted to periods as under:

Sector Mahandri - Naran. From May to December each year (8 months).

Sector Naran - Jalkhad. From June to October each year (5 months).

Weather Conditions: As highlighted earlier, there is heavy precipitation in the area, specially, during the monsoons. The heavy rainfall reduces the work periods to a further extent and hinders the progress on the road construction. Further, the road often gets blocked due to land slides etc. diverting the work effort to clear these road blocks, and thereby diluting work force employed on the widening works.

Land Slides: The area, being high intensity rain prone, and strata being highly unstable, lends itself to perennial problem of frequent land slides. From Balakot to Naran the alignment passes mostly over fill with kacha and temporary retaining structures, which are likely to be damaged, once the road is widened. At places, the road is dangerously narrow due to washing away of retaining structures due to slides. The Sector Mahandri - Naran has 23 avalanche sites. When the snow, due to overburden and host of other factors, slide down the mountain slopes, it brings muck along with and create road blogks, requiring immediate clearance to keep the road open.

Blasting Restrictions: Kaghan Valley is fairly populated, especially in earlier sectors, with small villages and settlements located all along the road and on the mountain slopes in the valley. In view of safety no major rock blasting can be undertaken. The drilling and blasting work is restricted to smaller sections, which effects the work progress.

Traffic Interru ptions: Traffic intensity on KVR, due to local population and tourists inflow is very high. The road sections, where work is in progress can not be closed for up-gradation works for longer periods, which effect the flow of traffic and cause inconvenience to the travelers and tourists. This constraint generation of the full work speed, thereby effecting the construction progress. This factor may be kept in view while making plans to travel to the area. Travelers are also advised to be patient and be prepared for little inconvenience while travelling on KVR. They are advised to cooperate with FWO troops who make an endeavour to keep the road closures to the minimum.

Miscellaneous: The progress on construction work is, further hampered by the long logistic tail, as the construction materials, petroleum products and rations for the work force are transported from Mansehra. Due to frequent landslides, at times, essential construction material can not reach the work site in the requisite time frame. The present road conditions do not allow plying of larger capacity dump trucks, restricting carriage of materials etc to tractor trollies, which increases the transportation time.


The Kaghan valley, still un-exploited to its fullest, has great potential for tourism and adventure activities like sightseeing, camping, climbing, trekking, lake-based water and winter sports. Up-gradation of KVR by Frontier Works Organisation is destined to bring far reaching economic benefits to the valley. It will, not only help generate greater inflow of tourism, both domestic and from abroad, but also will help increase in outflow of the local produce like timber etc. FWO is already being involved in the development of 1.5 MW capacity Hydel Power Station at Naran and certain tourist resorts and trekking areas around Lulusar Lake, in addition to the KVR up gradation project itself. Opening of this road, thus, will bring a new era of economic growth and prosperity to the area. It is hoped that FWO, notwithstanding the adverse work environments, will prove its mettle, once again, and come up to the expectations, by timely completion of the Kaghan Valley Road. The work on this vital road also demonstrates Government's resolve to develop, the hitherto, remote and less developed regions of Pakistan.