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Cover Story

It has nearly 10 per cent of the total exposure in Pakistan

Dec 06 - 12, 1999

The aim of Commonwealth Development Corporation (CDC) is to promote sustainable development in emerging economies such as Pakistan, through long term investment in value-added sectors on commercially competitive terms. CDC supported projects are expected to compete efficiently and without protective funding in domestic and foreign markets into the foreseeable future and beyond CDC's period of involvement. CDC also supports balancing, modernization and expansion of the existing investments where they can further enhance their contribution to the economies within which they operate. Economic growth is encouraged through the private sector investments. In a nutshell, CDC makes long-term funding available to the countries where international financial markets shy away from as being risky.

Incorporated by an act of British Parliament in 1948, CDC began by catering to the Commonwealth countries but subsequently expanded its horizons way beyond the Commonwealth. CDC is Britain's overseas development finance institution and its investments fall under the umbrella of Britain's Department for International Development. It was funded in the past by the British Treasury, but since 1992, it has become self-reliant by successfully recycling profits and repayments from existing investments. CDC applies private sector discipline to itself and its investments.

CDC plays an active role in Pakistan and at the same time achieve its objective. It has played a key role in the establishment and growth of some extremely successful projects which significantly contribute to the national economy. Pakistan, is generally perceived as a high-risk, high-reward country to invest in, and one in which, CDC is extremely active.

CDC has a diversified and growing portfolio of investments in Pakistan, currently totalling over 200 million pound sterling. This makes Pakistan CDC's largest country portfolio. It has focused strongly on the industrial and financial sectors and emphasizes on supporting infrastructure projects - all of which have high development value. CDC's first investment in Pakistan was in 1988. The considerable growth in the portfolio has been due to the following factors:

  • local knowledge, contacts and presence,

  • CDC's proactive but conservative approach,

  • careful choice of the partners,

  • recognition of CDC's role by prospective partners.

The ripple effect from East Asia presented a difficult start to the year 1998. This was exacerbated by the mid-year nuclear tests in India and Pakistan. The shortage of foreign exchange in Pakistan led to year-end arrears of 16 million pound sterling which, coupled with falls in equity values, resulted in increased provisions.

The year 1998 has been a difficult year for all investors in emerging markets particularly in Asia. However, CDC's shift of emphasis towards risk capital has coincided with the flight of commercial lenders from its key markets. This provides more opportunities than expected.

The UK government has taken significant steps in the process of changing the CDC from a statutory corporation into a public -private partnership. The new investment policy will continue to focus investment in low and middle income countries. While these guidelines in themselves are not expected to substantially alter its activities, its financial imperatives may shift dramatically. The previous 8 per cent target for return on capital employed is expected to be replaced by a requirement to earn a full risk-adjusted market rate of return.

Securing long-term funds is a major challenge for Pakistani companies, particularly those related to financial markets. The domestic market cannot provide all the funds that Pakistan needs. Multinational and bilateral institutions such as CDC can play an important role in bringing foreign funds into the country and encouraging other foreign investors to participate.

Investments in Pakistan


Engro Paktank Terminal

Fauji Oil Terminal

Habibullah Coastal Power

Hub Power

Karachi Water & Sewerage Board

Liberty Power

Qasim Inte'l Container Terminal


D. G. Khan cement

Engro Chemical Pakistan

Fauji Cement

Fauji Fertilizer

FFC-Jordan fertilizer

Celanese Pakistan


Sarah Textile

Financial Sector

Atlas Leasing

Crescent Leasing

International Housing Finance

Pak. Industrial Leasing Corp.

Security Leasing

Trust Investment Bank

Hotels & Tourism

Pakistan Services