Foreign investment is gaining
momentum in the country as reflected in the figures of the first four
months (July-October) of the current financial year (2005-06),
registering an investment of $682 million as against $300.7 million in
the corresponding period of last year.
The target of Director
Foreign Investment (FDI) for the current fiscal year was fixed at $3.5
billion, including the privatisation of PTCL and KESC.
Due to some snags developed
in the $2.59 billion deal of PTCL with Etisalat of UAE the target is
likely to be revised, however, the Privatization Commission (PC) is
trying to resolve the issue through negotiations.
KESC's sale proceeds of $340
million (partly recovered last week) will be finalized by the end of
the month. If deal with Etisalat also goes through, the target of $3.5
billion will be surpassed by a high margin, the authorities in the
Board of Investment believe.
Mr. Riaz-ul-Haq, Director
General of the Board of Investment, in an exclusive interview told
PAGE that USA led in investment with $256.4million during
July--October 2005. FDI from other countries during this period is: UK
$ 95.5 million, UAE $74million, France $1.3million, Hong Kong
$33.2million, Japan $14million, Saudi Arabia $9.0million, Canada
$1.1million, Netherlands $25million, Korea $0.4million, Singapore
$1.8million, China $0.6million, Australia $10.6million and Switzerland
How the inflow of foreign
investment in Pakistan is getting momentum can be judged from the
following chart for the last 21 years.
1984-85 US$ 94 million,
1985-86 161 million, 1986-87 129 million, 1987-88 173 million, 1988-89
217 million, 1989-90 212 million, 1990-91 237 million, 1991-92 554
million, 1992-93 443 million, 1993-94 643 million, 1994-95 1532
million (because IPPs), 1995-96 1307 million (because of IPPs),
1996-97, 950 million, 1997-98 823 million, 1998-99 500 million,
1999-2000 543 million, 2000-01 182 million, 2001-02 474 million,
2002-03 820 million, 2003-04 922 million, 2004-05 1677 million. If
divided by 21 years the yearly average of FDI comes to $ 599 million.
During the current year's
four months (July-October 2005) an investment of $ 682 million was
received, the DG Board of Investment claimed.
President General Musharraf,
during a high level meeting in Islamabad in September last gave a
target of $27 billion FDI during the next five years. Replying to
question as to how the Board planned to achieve this target, Mr.
Riazul Haq observed that the target sounded high but it was achievable
with little extra efforts and vigilance. The yearly target comes to
about $ 5.5 billion and the Board is of the view that with full
support of the President and the Prime Minister "we can meet the
expectation." The Board has started planning in this direction.
The Prime Minister presided
over a meeting of Board of Investment last week in which he
constituted four committees that would submit recommendations to the
Board of Investment BOI) within one month for attracting both domestic
and international investment in specific areas. Chief ministers of
Sindh, Balochistan and NWFP, the Punjab Minister for Law, federal
ministers and prominent bankers and industrialists attended the
The committee on facilitation
of Private Enquiry Fund, with Nasir Ali Shah Bokhari as its
coordinator, and the Private Power Investment Committee, with Mian
Mansha as its coordinator, will submit a strategy for the facilitation
of investment in this key area. The Land Acquisition Committee, with
Shahid Feroz as its coordinator, will submit recommendations to
simplify land acquisition from the provincial governments. The
Corporate Farming Investment Committee, with the minister for food as
its coordinator, will ensure that the provinces complete the pending
cases relating to the corporate farming.
The Prime Minster directed
the BOI to remove all impediments to investment, domestic and foreign,
especially in the areas of land acquisition, provision of utilities
and facilitation at the provincial and local levels. The Minister for
Privatisation and Investment will visit the provinces and review the
functioning of the provincial investment committees and suggest areas
for reforms in functioning and deregulation.
The BOI has also launched a
campaign through Pakistan Embassies in leading countries of the world
to personally contact 20 to 25 top-level companies working in
different sectors and inviting them to Pakistan to see for themselves
the lucrative business/investment opportunities in this country. The
BOI has compiled a profitability chart of over a dozen foreign
companies operating in Pakistan in different fields covering the past
six years. The yearly average of profit ranges from 17 to 88 percent.
These figures are lucrative enough to attract foreign investors.
Continuity in policies, fiscal reforms, deregulation and emphasis on
private sector, liberal investment policies pursued by the present
government and its focus on improved governance has helped a lot in
gaining the confidence of the foreign investors.
The DG, BOI mentioned the
following steps taken by the government in pursuance of its liberal
Equal treatment to local and foreign investors.
All economic sectors open for FDI.
Foreign equity upto 100% allowed.
government sanctions required.
Remittance of royalty, technical & franchise fee and profit
Foreign investment fully protected.
THE BOI IS FOCUSING ON THE
FOLLOWING COUNTRIES FOR THE FDI:
China, USA, UK Germany,
Italy, France, Saudi Arabia, UAE, Oman, Qatar, Kuwait, Sweden,
Finland, Netherlands, Denmark, Norway, Austria, Belgium, Spain,
Australia, Japan, South Korea, Malaysia, and Singapore. The priority
sectors for the FDI are oil and gas, power, IT and Telecom,
Agriculture, Mining, SMEs, Infrastructure and Tourism.
The BOI is convinced that if
the present policies continue with firm monitoring of the work of the
committees at the highest level of the Prime Minster and the law and
order situation is further improved then the target of $ 27 billion
FDI will not be difficult to achieve.
It is heartening to note the
BOI is fully alive to the situation doing all the legwork of research
and compilation of necessary data and taking prompt decision for
removing hurdles and bottlenecks in the smooth flow of FDI.
According to the BOI's
decision, the condition that foreign investors in the services sector
compulsorily dilute their 100 percent equity holdings over a period of
five years into 60 percent by inviting 40 percent equity investment
from local entrepreneurs, has been completely waived. Additionally,
the restriction on repatriation of profits beyond 60 percent has also
been waived, and foreign investors may now remit the entire profit.
Among other BOI decisions, no
official permission or sanction will be required by a foreign investor
for the establishment of a new industrial unit, with the exception of
a few sensitive industrial ventures, including manufacture of arms and
ammunition and explosives, radioactive substances, security printing,
distillation of wine except industrial alcohol. The BOI claimed that
Pakistan offered one of the best packages of incentives and facilities
to prospective foreign investors compared with several other countries
in the region. This is an irrefutable truth, which is illustrated by a
sustained increase in the inflow of foreign investment into Pakistan.