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Bright prospects for foreign investment in Pakistan

Present government is earnestly trying to restore the confidence of foreign investors

From Shamim Ahmed RIzvi, Islamabad
Mar 05 - 11, 2001

Persistent efforts of the present government, personal efforts of the Chief Executive in particular, spread over the past one year, has certainly improved the prospects of foreign investment in Pakistan.

During the last few months trade and business delegations from various countries visited Pakistan and Gen. Musharraf met almost all of them and missed no opportunity to explain to them the numerous measures his government had taken to protect the interests of foreign investors in Pakistan while, at the same time, identifying the different sectors of economy which offered lucrative business opportunities. Besides, he himself visited a number of countries both, in east and west and always made it point to meet their business and investors communities. The nearly 40 months long HUBCO-WAPDA row which had marred the foreign investment climate in Pakistan was resolved in Dec. last through personal efforts of the Chief Executive. This proved to be an eminently welcome development and certainly paved the way to restart the inflow of foreign investment in Pakistan.

The month of Feb. proved to be a month of significant development from this point of view. Delegations of businessmen and potential investors from many countries such as Japan, China, Malaysia, Indonesia, Saudi Arabia, Romania, visited Pakistan and showed keen interest to invest in different sectors of Pakistan's economy.

Addressing the representatives of the pharmaceutical industry at an international conference held in Lahore last month the Board of Investment (BoI) Chairman, Waseem Haqqi, outlined the policies of the present government aimed at improving the industrial climate in so far as fixed capital investment is concerned. The policy, according to him, is based on the principle of deregulation, fiscal incentives, liberal remittance of profits and capital, debt servicing, payments of royalties, technical fee etc. He emphasised the need for promoting investment in sophisticated, high-tech and export oriented industries while almost the entire economic activity in other fields, encompassing agriculture, services, infrastructure social sectors etc. have been thrown open for foreign investment with identical fiscal incentives and other facilities, including loan financing from local banks.

Haqqi also disclosed that import of plant and machinery for new industries would be allowed duty free in case such machinery was not manufactured in Pakistan. He also informed the audience that first year tax relief in the form of accelerated depreciation allowance was also available to priority industries, besides the availability of similar relief to existing industries undertaking balancing, modernisation and expansion in production facilities.

Establishment of Pak Japan Business Forum in Karachi was the most significant event of the month. While speaking at the launching ceremony Japan's Ambassador Sadaski Humata rightly pointed out that the event certainly marked a major development in the economic relationship between the two countries. This should become all the more evident from the primary aim of the forum, as the ambassador elucidated, is to enhance mutual trust, understanding and friendly relations between the businessmen of Pakistan and Japan.

Speaking on the occasion, the Pakistan Minister for Commerce, Mr. Razzak Dawood said Pakistan and Japan are working together in many fields including bilateral trade, despite differences on signing of the Comprehensive Treaty for Banning (nuclear) Tests (CTBT) by Pakistan, he said, his government considers private sector the engine of growth and has assigned it a pivotal role in the development of the economy. We are restructuring the economy, and through it is a painful process but in the end it will provide immense pleasure, the minister revealed.

In a landmark development Saudi Arabia signed an accord with Pakistan focusing on boosting cooperation in trade and industry through joint ventures and investment in Pakistan. The accord was signed after 2 day high level sixth session of Pak-Saudi joint ministerial conference at Riyadh. During the visit, Federal Finance Minister met a number of business magnets of Kingdom in Riyadh and Jeddah. In Jeddah, he met Saudi Chamber of Commerce officials and leading Saudi businessmen. The Pakistan Mission in Riyadh and the Consulate in Jeddah, arranged separate one to one meeting between the Pakistan businessmen and their Saudi counterparts.

On his return to Pakistan, the president Federation of Pakistan Chambers of Commerce and Industry Malik Iftekhar who was included in the Pakistani delegation told newsmen that Saudi investors and leading business magnates have shown interest in setting up cooperative ventures and investments in several industrial sectors in Pakistan. These includes cement, chemical fertilizers, industrial fibre, paper products, chemicals and petrochemicals, electronics, agroindustries, ship building, petroleum and gas sectors.

He said that many new areas for collaboration in scientific, technical and cultural fields had also been identified. He said it has been decided to re-invigorate the role of Saudi-Pakistani Business Council, which would be an excellent forum for mutually beneficial interaction between the private sectors of both countries. The two countries had also agreed to review an agreement on promotion and protection of investment which would improve import/export procedures.

Malik Iftikhar said that in view of the privatization policy, both sides would benefit from each others experience, particularly in the privatization of energy, communication and electricity projects. Besides the areas mentioned by his Saudi counterpart, Pakistan would also facilitate training of Saudi personnel in Railways as well as Telecommunication, especially mobile and postal sectors, he added. Co-operation in the field of agriculture would encompass research, quarantines, technology and visits of experts on desertification, desalination and livestock management.

It is really commendable that the present government is earnestly trying to restore the confidence of foreign investors and has adopted a positive approach for improving investment climate. Fiscal and other concessions have been liberally given by the government with a view to making the investment climate in Pakistan more attractive for direct investment in industry, agriculture and services sectors by both domestic and foreign investors. The liberalisation of incentives reflected the government's understandable anxiety over the continued lull in direct investment by both domestic and foreign entrepreneurs. Therefore, the new policy measures are aimed at overcoming the prevailing stagnation. This is indeed a welcome move but it is yet to be seen whether the investment interest having remained on the sidelines for the past three years would at all show a positive response to the latest package of incentives.