BOOSTING FOREIGN INVESTMENT
Investor's in Malaysia, Hong Kong and Singapore are showing keen interest in investing in Pakistan
From SHAMIM AHMED RIZVI,
June 28 - July 04, 2004
As a part of its effort to attract investors and boost foreign investment in Pakistan, the Board of Investment (BoI) has open an office in Kuala Lumpur, Malaysia. The office will act as a gateway for Malaysia investors and brief them on the most attractive investment opportunities available in Pakistan.
Investor's in Malaysia, Hong Kong and Singapore are showing keen interest in investing in Pakistan. This was evident when the Prime Minister Mir Zafarullah Khan Jamali visited these countries last month and met the potential investors during the Investment Conferences arranged by the BoI with the help of local Pakistani Embassy and the chambers of commerce. As a follow up it was decided to set up an office at a central place in Malaysia to provide on the spot all information needed by the intending investors.
The BoI regional office was formally opened last week. The ceremony was witnessed by Uang Berhormat Datuk Samy Vellu, Minister of Works, Yang Berhomat Dato, Seri Shahrizat Abdul Jalil, Minister for Women, Family and Community Development, Tani Sri Ahmad Fuzi Hj. Abdul Razak Secretary General, Minister for Foreign Affairs, together with Talat Munir, High Commissioner of Pakistan to Malaysia.
The economy has shown significant improvement in almost all sectors in fiscal year 2004-2005 except the direct foreign investment, which remained sluggish as compared to other sector. Although the first six-month (July-December 2003) did no show any increase in direct foreign investment, it started picking up during the second half of the financial year. That too remained confined to gas, oil exploration and power sectors. What is, however, needed is diversification. Now there are strong indications of significant increase in the investment. It is hoped that investment climate will improve in the coming months. Numerous new foreign investors ranging from China, Malaysia, Singapore, South Korea, Saudi Arabia, UAE, USA and Pakistani expatriates in different countries 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 the huge market of Central Asia, FDI inflows during fiscal 2003-04 rose to $798 million, in contract to $485 million in 2002. It followed on the back higher economic growth, macro-economic stability, financial sector and governance reforms, privatization of state-owned enterprises (SOEs), up graduation 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 $244.5 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 $1 billion in this sector. Telecom, autos, trade, transport, pharmaceuticals, chemicals, fertilizers and textiles, are other attractive areas.
The setting up of the BoI, office in Malaysia is timely since the past five years saw a 41.1% increase in total Malaysian investment into Pakistan, over RM 690 million, compared to Malaysia's total investment into the South Asian region of RM 487 million within the same time period. In 2003, Malaysian companies invested RM 100 million in Pakistan in the key sectors of power generation — oil and gas, port Facilities, rice processing information technology and property development. These figures, related by Bank Negara Malaysia, clearly reflected that vast opportunities are available for Malaysian to invest in Pakistan. In fact, Pakistan has also attracted reputable international foreign investor, with investments amounting to over US$ 820 million over the last financial year.
The investments are both portfolio and direct, particularly in the top six growth sectors of power generation. The current total foreign investment of over US$629 million from July 2003 to April 2004, reported by the statistics department of the State Bank of Pakistan, indicates the healthy investment climate in Pakistan. This is further supported by its developing infrastructure, stable administration, investor-friendly policies, expensive resources of land and human capital plus its cost competitiveness compared to other countries in the region.
With Pakistan's emerging middle class and the return of overseas Pakistanis, investors are assured of top quality professionals to assist their investment growth in the mid and long term. The American Business Council's recent survey, where the respondents are made up of mainly formal associations of American conglomerates, found the investment climate of Pakistan to be very favorable. The ABC Survey showed that 93% respondents reported improvements in the domestic economy, while 90% reported increase in their gross revenues in dollar terms. It also indicated that a hefty 88% were optimistic about Pakistan's overall prospects.
One of Pakistan's top investment opportunities lies in the infrastructural development sector, namely, the Gwadar Deep Water Port Project at the tip of Straits of Hormuz/Persian gulf. This project has immense geopolitical significance due to its potential to become a regional hub and also a vital link to China and Central Asian Republic. The other key areas of opportunities lies in the textile, chemical, engineering industries, hydro power general, oil and gas, telecommunications, housing and real estate development, steel and agro-based industries. It is a well-known fact that agricultural and food import make up a huge percentage as far as the Malaysian market is concerned. Textile manufacturing is one of Pakistan's strengths, as the country act as manufacturing base for many international brands. Malaysia can therefore, be able to look towards Pakistan for all its textile needs.
Relationship between countries is always reciprocal. As Malaysia is a major exporter of palm oil, IT production and tourism product to Pakistan, Malaysia in return can source its textiles, agro products, light machinery, sport goods etc. requirement from Pakistan. The business of building Pakistan's tourism infrastructure is huge and Malaysians will be in the position to offer development expertise for building hotel, lodges and golf courses. With the mutual encouragement and support by the government of Malaysia and Pakistan, investors now have the opportunity to develop joint ventures and to participate in many budding projects, which are multiplying to create a "win-win" economy for both countries.