It has nearly 10 per cent of the total exposure in
By SHABBIR H. KAZMI
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:
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
Karachi Water & Sewerage Board
Qasim Inte'l Container Terminal
D. G. Khan cement
Engro Chemical Pakistan
International Housing Finance
Pak. Industrial Leasing Corp.
Trust Investment Bank
Hotels & Tourism