FOREIGN INVESTMENT IN PAKISTAN
$3.5 billion FDI target for 2005-06 likely to be revised
From SHAMIM AHMED RIZVI, Islamabad
Nov 28 - Dec 04, 2005
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 $43.2million.
How the inflow of foreign investment in Pakistan is getting momentum can be judged from the following chart for the last 21 years.
1984-85 US$ 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 meeting.
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 investment policy.
a) Equal treatment to local and foreign investors.
b) All economic sectors open for FDI.
c) Foreign equity upto 100% allowed.
d) No government sanctions required.
e) Remittance of royalty, technical & franchise fee and profit allowed.
f) 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.