PAKISTAN PROVIDING FERTILE GROUND TO MULTINATIONALS
According to a latest survey of the world markets, Pakistan has been included in the 10 most attractive countries for multinationals and other foreign investors.
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Sep 04 - Sep 10, 2006
Multinational companies always make a positive contribution to the economic growth of developing countries through their investments, products and services. For attracting multinationals a country has to offer an investor-friendly environment, availability of basic infrastructure, profitable business opportunities and above all good law and order situation. Luckily, Pakistan has been able to offer multinationals all these pre-requisites during the last four to five years. Pakistan has fully benefited from this environment as foreign direct investment (FDI) reached an all time high figure of about $ 4 billion during the outgoing financial year (2005-06). According to the latest survey of the world markets, Pakistan has been included in the 10 most attractive countries for multinationals and other foreign investors.
According to a latest data compiled by the Overseas Investors Chambers, there are 168 multinationals presently operating in Pakistan, of which 106 belong to industrial undertaking, 23 in trading and 27 in banking and financial services, 12 in insurance, shipping and airlines. Their country-wise breakup is: US, 44; British, 41; Europeans, 45; Middle East, 13; and others. These companies have approximately Rs. 241 billion in equity, of which Rs. 120 billion comprises foreign equity. The sales of these companies represent 11 percent of GDP of the country and 32 percent of the GDP of manufacturing sector.
The Overseas Investors Chambers of Commerce and Industry Pakistan is playing a positive role to promote foreign investment in Pakistan by interacting with the multinationals and protecting and promoting commercial, industrial and functional interest of foreign investors engaged in commerce and industry activities in Pakistan.
The most attractive sector for the multinationals to invest during the last 5 years has been the country's telecom sector. Today Pakistan's telecom market is viewed as one of the fastest growing markets of the region. Almost all major world players in this filed have their presence in Pakistan. The telecom sector in Pakistan is growing at a spectacular pace with a promising future forecast, indicating rapid growth in the use of mobile phones, rapid expansion in wireless sets and more competition in the fixed line telephony after the privatization of state-owned giant Pakistan Telecommunication Company (PTCL). According to Syed Vaqar-ul-Islam, Nokia chief in Pakistan: "Today our telecom market is viewed as one of the fastest growing markets of the region".
The information technology (IT) industry has revolutionized numerous developing economies across the globe; having gained the status of a flagship industry in most cases. Gone are the days when it was considered as the future's industry; today, it has emerged as one of the most potent forces in economic development along with the portfolios of energy, telecommunications and communication thereby encapsulation the entire realm of economic growth - from internal as well as external perspective(s).
Although it took a late start in Pakistan, the local IT industry today has matured enough to play a vital role in economy. Like other industrial sectors, it has undergone an initial phase of learning, experimenting, failing and in most cases successfully delivering on its promise(s). A strong commitment on the part of the government in developing this industry has witnessed a phenomenal growth in the recent past. The industry is now ready to lead from the front. It is recognized worldwide in terms of equality standards and a sufficiently developed resource pool. Some globally known blue chips like Diamlier Chrysler, Toyota, GE, Citibank etc. are added up to the long list of international customers.
The industry is now preparing itself to play a major role in revenue and employment generation in the country. It is believed that it would be progressing rapidly soon it touches a billion dollar mark. The Indian IT industry, on the other hand, is generating some $ 20 billion revenue with a future planning of expanding it to $ 60-80 billion. In the last five years, the government had taken very commendable steps to give impetus to the IT industry. Availability of infrastructure, bandwidth connectivity, telecommunications, besides setting up the IT Ministry, federal IT Secretariat and Pakistan software exports have started yielding results.
According to Dr. Mateen, the IT Advisor to the Minster for Science and Information Technology, IT industry in Pakistan today is probably the most exciting and dynamic sector of the national economy, which is supporting revenue growth by 30 to 40 percent annually. He claimed that almost all the leading IT players in the world have ensured their presence in Pakistan. The growth in cell phones has been tremendous. It has already crossed the figure of 25 million and is increasing by about almost 1 million every month.
The contribution of telecom sector in the growth of economy is of huge importance as witnessed in economies like USA, where services sector's contribution towards GDP is 80%, of which approximately 30% is contributed by IT and telecom. The service sector has witnessed a strong growth of 9% during 2005-06, with 5.6% contribution from transport and communication. It is expected that due to deregulation of telecom sector last year and considerable upcoming investment in this sector, it will become a major contributor to the service sector in the country in the coming years.
It is noteworthy that it is a result of vision and commitment of current government to establish Pakistan Telecom Authority (PTA), which has played an important role in the smooth and transparent deregulation of telecom sector.
Pakistan telecom industry has come a long way since the implementation of deregulation in January last year and recent privatization of PTCL. With the increased competition, a consumer is benefiting in terms of variety of options available along with lower tariffs. Two years ago average per minute rate was approximately Rs. 10 (inclusive of all taxes), which has been reduced to Rs 3 to 4 (inclusive of all taxes) per minute. The positive effects are visible from the increase in cellular penetration in the country. The cellular density has grown from 3% in the beginning of last year to 8%. The cellular subscriber base has increased from 5 million in last year to approx 14 million to date. Telecom sector has contributed approximately Rs 15 billion (USD 250 million) in the form of taxes through central exercise duty (CED) and general sales t ax (GST) against approximately Rs. 12 billion (USD 200 million) during the last year.
Pakistan Telecom Authority (PTA) received over Rs 30 billion (USD 500 million) from licence fees from new operators during 2003-04. It is expected that an amount of USD 58 billion (approximately Rs. 300-400 billion) in foreign direct investment will be contributed by IT & telecom sector in the next 3 to 5 years. The sector has generated more than 350,000 direct/indirect employment opportunities. These positive changes would not have been possible without the consistent and investment-friendly policies implemented by the government. The government has been supporting the telecom sector through the regulator since the deregulation of the industry.