US FIRMS TO ENHANCE INVESTMENTS
The GoP and local producers of textiles and clothing must not fail in attracting the US investment in the sector
By SHABBIR H. KAZMI
Dec 29 - Jan 04, 2003
Most of the US-based companies operating in Pakistan plans to undertake expansion in their respective businesses. They seem to be satisfied with the improving economic fundamentals. However, they still have certain reservations mainly due to the negative perception about Pakistan. The working environment is not as bad as being portrayed.
Anjum Fasih, President of American Business Council (ABC) disclosed this at a media briefing held recently. He shared the findings of an annual informal business survey conducted by the ABC among its members. Out of the total 54 members of the ABC, 41 responded. This survey is conducted by the ABC among its members to assess their perception about the investment climate in the Pakistan.
Sharing some of the details of the survey results, Anjum said, "The feedback received from our members indicates significant improvement in their perception about the conditions that affect their businesses and future investment plans in Pakistan." However, he urged the Government to focus on improving situation regarding corporate and personal taxation; effective enforcement of laws pertaining to Intellectual Property Rights (IPR), i.e. patents, trademarks and copyrights; deregulation of industries, particularly pharmaceutical pricing and oil marketing companies margins; combating corruption and smuggling; tariff rationalization; improving corporate governance; improving infrastructure and law and order situation; and transparency in government decision making.
Fasih assured the full support of ABC member companies to the Government and their willingness to work with it for further improvement in the investment climate. Fresh investment and creation of new job opportunities can lead to sustained growth of the economy for the benefit of the people of Pakistan, particularly in poverty alleviation.
The ABC functions as the Chamber of Commerce & Industry of American companies operating in Pakistan. It has the distinction of being the largest group of single country investors in Pakistan. Most of the 54 ABC members belong to Fortune 500 companies. Besides adherence to the highest quality standards, the US investment has brought about transfer of sophisticated technology to Pakistan, which is updated on an ongoing basis.
The ABC members employ 20,000 people directly. They have the highest professional standards and continue to develop talent in the country. It is interesting to note that in 2002 only 12 expatriates were employed in Pakistan whereas 134 Pakistanis were working abroad with associates or sister companies and their headquarters. Collectively they contribute a sizable amount to the national exchequer as direct and indirect taxes every year. Last year, they contributed over Rs 34.5 billion to the national exchequer, which comes to about 9% of the total revenue collected by the Government.
American companies operating in Pakistan have diversified interest. Out of this largest number belongs to healthcare (11) followed by information technology (8), chemical and fertilizer (5), financial services (5), food and beverage (5), Energy, oil and gas (4), engineering (2), textiles (2) and others (12). Out of these 11 are listed at local stock exchanges.
Over the years, US companies have been making substantial investment in Pakistan. The level of confidence of these companies in the economy of country is evident from the fact that have been ploughing back a large percentage of their annual profit in Pakistan. Lately, energy sector has attracted the attention of US investors and they have been making substantial investment in the sector.
An area which has still not attracted the US investors is textiles, particularly made-ups manufacturing. The US is the largest buyer of textiles and clothing from Pakistan. A lot of US-companies are interested in outsourcing their production to other countries. The GoP and textile manufacturing companies should not ignore the opportunity.
HIGHLIGHTS OF THE SURVEY
*93% of the respondents feel improvement in domestic economic condition 88% are optimistic about Pakistan's overall prospects
*77% reported planning further investment in Pakistan, which means 31 companies out of 41 responded to the survey
*90% reported increase in gross revenue in dollar terms and 84% in rupee terms 86% reported surge in pre-tax profits
*45% said Government policies were more consistent and 31% also said that there was improvement in implementation of policies
*78% observed improvement in external political situation while 29% indicated improvement in internal political situation and 37% felt no change
*82% said that ABC suggestions were partly accepted by the Government
*64% indicated improvement in State Bank's working and also some improvement in the working of other government departments.