Although the first five months (July-Nov) of the
current fiscal year did not show any increase in the direct foreign
investment there are strong indications that investment climate will
improve in the coming months. Numerous new foreign investors ranging
from Saudi Arabia to Chinese and Pakistani expatriates in the United
States are coming to Pakistan to invest in different sectors.
Besides, capturing the domestic market of nearly 150
million, the new foreign direct private investment is focused on
locating foreign companies in Pakistan which is increasingly turning
itself into a production base for the untapped but huge market of
Central Asia. FDI inflows during fiscal 2003 that ended June 30 this
year, rose to $798 million, in contrast to $485 million in 2002. It
followed on the back of higher economic growth, macro-economic
stability, financial sector and governance reforms, privatization of
state-owned enterprises (SOEs), upgradation of Pakistan government's
foreign debt and financial sector ratings, and some improvement in law
and order situation.
The FDI came from the following countries: the United
Kingdom $219.4 million, the United States $211.5 million. Other
investors were from Japan, Hong Kong, Germany, Singapore, Switzerland,
Netherlands and China. The investment went into financial business. Oil
and gas exploration and production is now an attractive field. Petroleum
Minister Naureiz Shakoor said, over the next two years, foreign
companies have committed to invest more than $ one billion in this
sector. Telecom, autos, trade, transport, pharmaceuticals, chemicals,
fertilizers and textiles, are other attractive areas.
After a record rise to $11.7 billion in the forex
reserves, and "the improved risk perception as reflected by recent
upgradation of Pakistan's sovereign rating and secondary prices of Euro
Bonds, it is expected, the FDI will gradually pick up in Pakistan,"
governor SBP claims. Despite the fact that FDI inflows during the first
four months — July to October — of the current fiscal 2004 tallied
up to $ 170.3 million, down from $ 406.6 million in the like period of
fiscal 2003, the government analysts still expect, the amount will go up
in coming months. Their projections are based on commitments and
investment plans announced over the recent weeks, in view of good
corporate profitability. Even the national flag carrier, Pakistan
International Airlines (PIA), has just projected its profit for calendar
year to end December 31, 2004 at Rs.4.366 billion, up from Rs.3.334
billion in year to December 31, 2003.
One of the most significant investment plans, just
announced by Al-Tuwariqi Group of Companies, Damam, Saudi Arabia, is to
establish a steel billets plant at Karachi, near Pakistan Steel Mills.
Mr. Liaqat Jatoi, Minister for Industries and Production, said the
government has declared the 100-acre location for the plant at Export
Processing Zone in order to allow it fiscal and production incentives.
The entire annual production of one millions tons of
steel billets by this $100 million plant, will be exported to Saudi
Arabia. The export potential of the plant is $180 to 200 million
annually. The plant will be based on the modern technology of a
sponge-iron, using natural gas. Its billet melt-shop will be based on
electric, furnace technology and continuous casting. "The Saudi
Arabian company's investment in Pakistan is a good sign, and a
reflection of pro-business policies of the government of Pakistan,"
Microsoft boss Bill Gates telephoned President
Mushraff last month and informed that Microsoft Corporation was
examining prospects of investment in Pakistan," Musharaff said he
welcomed him. The two plan to discuss investment details when they meet
in January at Davos, Switzerland at the World Economic Forum. Musharraf
also said, "I am pleased at Bill Gates investment in IT business in
Pakistan. I briefed him about the tremendous potential that Pakistan
offers in this field, and informed him of the progress made in IT over
the last few years, incentives offered for its promotion, a massive
reduction in the bandwidth rates and establishment of an infrastructure
Business has long pinned it hopes on investment by
overseas Pakistanis to kick-start a new phase of private investment. It
is emerging in the form of a new private airline — Airblue. The Civil
Aviation Authority, the industry regulator, has okayed Airblue
operation. The airline, to begin with, will start flying its three new
wide-bodied aircraft to major Pakistani cities in early 2004. It will
have an initial investment of Rs.500 million. Tariq Chaudhary, a
US-based Pakistani IT expert, is the Chief Executive and Chairman of the
Airblue. He is assisted by Khaqan Abbasi, the former Chairman of PIA.
PIA has a 75 per cent market share in Pakistan at present. Two private
Pakistani airlines namely Shaheen Air International and Aero Asia handle
the remaining 25 per cent.
Deputy head of the Pakistani Mission in Beijing
recently gave the details of Chinese assistance to Pakistan in different
forms including direct investment. In an interview to APP's Beijing
correspondent he said China's total financial commitments to Pakistan
during the last three years have reached around dollar six billions to
help in implementing important public sector projects. These commitments
were made in the form of grant, credit and direct investment. The
projects have already been identified and necessary agreements,
contracts of MoUs have been signed. Some of the projects are under
implementation or at the negotiating stage.
The Sino-Pakistan economic cooperation has entered a
new stage in the recent years. There are growing numbers of state-run
Chinese companies which are taking part in the country's development
activities. These companies have pledged to extend both financial and
technical support to undertake some pending or new projects.
The projects include Gwadar seaport. Thar coal,
second phase of Chashma nuclear power plant, rehabilitation of Pakistan
Railways. Saindak coalmine, white oil pipeline and steel mill extension
project, besides a number of other in hydropower sector.
Giving the details of economic cooperation. China's
direct new foreign investment in Pakistan has also exceeded dollar 300
million during the last three years. There are about dozen Chinese
companies, including Haer Electronic, ZTE corporation, Dongfong
Automobile, MCC and Sino-Trans which have started making direct
investment in Pakistan.
The Chinese Zooda Bus Company has entered Pakistan to
set-up an assembly plant. The company annually produces 20,000 buses in
China, with a revenue turnover of $500 million, has established a local
company, Zonda Pakistan (Pvt) Limited. Mr. Bilal Janjua, its CEO, said
the company has already booked orders from big Pakistani transporters in
all major cities. It will promote and produce buses in Pakistan. It will
also sell the buses in Pakistan and in the Middle East.
Federal Minister for Investment and Privatization,
Dr. Hafeez Shaikh at a recent press briefing in Islamabad confidently
claimed that Pakistan was all set to fetch big investors from Saudi
Arabia as a number of Saudi investors have shown great interest in
setting up new production units in different sectors in Pakistan.
Besides setting up a mini steel mill in Karachi by Al-Dawarki Group.
Pakistan is likely to get a big share in the multi-billion dollars
investment plan of the Saudi government for massive expansion of railway
in Saudi Arabia.
He said that he had made efforts to convince the
president of Saudi Railways to extend some contracts to Pakistani
companies. The Saudi government had given formal approval to the project
and the possibilities of Pakistan's participation in it were under
consideration, he added.
He said that another Saudi conglomerate, Tamimi
Group, had shown interest in setting up a petro-chemical unit, besides
bringing some investment in the gems and jewellery and education
sectors. The head of the group, Tarique Tamimi, was scheduled to visit
Pakistan in March next year to finalize the plans, Shaikh said. Adding
that Saleh Al-Subai, having assets of four billion Saudi riyals, was
also likely to visit Pakistan in March to assess the investment scenario
and economic policies. In order to boost economic ties between the two
countries an investment conference would be held in Islamabad in March
next year, he added the conference would be a follow-up of this meeting
with the Saudi foreign minister during Saudi Crown Prince's visit of
He hinted that some Saudi businessmen had expressed
interest in the bidding of Karachi Electric Supply Corporation.
The visit of Kazakhstan President to Pakistan,
signing of many agreements for cooperation in economic field and the
meeting of Pak-Kazakhstan Business Forum and the ongoing IBC Gulf
business conference in Islamabad will also help in attracting sizable
direct foreign investment in Pakistan supporting the view FDI will pick
up significantly during 2004.