PAKISTAN EXPECTING QUANTUM JUMP IN FDI
Board of Investment seems confident to cross the $7 billion figure by June '07
SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Oct 23 - Nov 05, 2006
Pakistan is expecting a quantum jump in Foreign Direct Investment (FDI) during the current financial year (2006-07) and the Board of Investment seems confident to cross the figure of $ 7 billion by June 2007. The year 2005-06 ended up with an investment of $ 3.5 billion, which included $ 1.11 billion as privatization proceeds during the year. This year, however, the authorities believe that the share of privatization proceeds in the expected FDI of $ 7 billion would not be that high.
The prospect of foreign investment in Pakistan has brightened partly due to the global political situation and mainly because of the persistent efforts of the government starting from the President down to the Chairman Board of Investment to prepare and present Pakistan to the world investors as one of the best countries for safe investment with a promise of higher returns on their investment. President Musharraf and Prime Minister Shaukat Aziz have undertaken extensive tours of promising countries to market Pakistan's potential in different sectors. They have specially focused on Middle East, UAE, Kuwait and Saudi Arabia and highly succeeded in their efforts as is indicated by the numerous initiatives of the rich investors from these countries during the last few months.
Last year President General Musharraf, chairing a high-level meeting in Islamabad last month, 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, DG, Board of Investment 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 the full support of President and Prime Minister we can meet the expectation". The board has started planning in this direction.
The Prime Minister 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 Privatization and Investment was asked to visit the provinces and review the functioning of the provincial investment committees and suggest areas for reforms in functioning and deregulation.
The BOI also launched a campaign through Pakistan embassies in leading countries to personally contact 20 to 25 top level companies working in different sectors and invited 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 up to 100% allowed.
d) No government sanctions required.
e) Remittance of royalty, technical and 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 are continued with firm monitoring of the work of the committees at the highest level of the Prime Minister and the law and order situation is further improved then the target of $ 27 billion FDI would easily be achieved by 2010.
However, in view of some initiatives taken by the world renowned UAE companies in the construction sector, it seems that the target of $ 27 billion given by the President by 2010 would be exceeded by a big margin. The Economic Coordination Committee of the Cabinet (ECC), in its meeting on October 8, approved a plan submitted by United Arab Emirates based firm Emmar having a worldwide presence to build a model city in Karachi with a total investment of $ 43 billion during the next 10 to 13 years. Pak Gulf Construction Company, a joint venture of Saudi and Pakistani investors, has already started work on a huge construction project in Islamabad involving an investment of about $ 2 billion. This phenomenal investment plans by Dubai groups in various property and industrial projects also signal the dawn of a new era of foreign direct investment flow into Pakistan.
GLOBAL DEPOSITORY RECEIPTS (GDR) OFFERS OF SHARES (PIPELINE)
In addition to the investment programmers unveiled by Emmar and Dubai World, Dubai Islamic Bank (DIB) also committed an investment to its operations in Pakistan and will also open 79 branches in the next 18 months. A Memorandum of Intent was signed between DIB and the State Bank of Pakistan to open the branches in the next 18 months. The landmark investment commitments, made during the visit of His Highness Shaikh Muhammad bin Rashid Al-Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, come close on the heels of upgrading Pakistan's foreign currency ceiling and an upbeat economic forecast of 8 percent growth made by Prime Minister Shaukat Aziz on record foreign investment and rising consumer spending.
Islamabad is home to two Emmar-Pakistan projects - the Highlands and Canyon Views. With 1,500 acres between them the Islamabad communities offer 9000 luxury single-family town homes and villas in a range of architectural styles with easy access to amenities including retail centers, community club house, parks, lakes, schools and mosques. Karachi will be home to Crescent Bay, a 75-acre development featuring high and mid rise towers for residential and commercial use, a shopping center and five star beach front hotel. The towers will contain approximately 4,000 residential apartments. Mohammad Ali Alabbar, Chairman Emmar Properties, has already remarked that Pakistan represented a vital link in Emmar's global and regional plans.
The United Arab Emirates will also invest millions of dollars in power sector in Pakistan as announced by the UAE Minister of Energy Muhammad bin Dha'er al Hamili during his visit to Pakistan in February this yea. The UAE minister, in his meeting with the Minister for Water and Power Liaquat Jatoi, termed Pakistan a country of high economic growth, which was emerging as a potential market in the region. During the meeting, both the sides agreed that there should be continuity of such meetings to early finalize the investment projects. It was decided that the Pakistani ministry, NESPAK and PPIB will provide all required information and detailed study reports of various water and power sector projects.
It was also observed that the power sector had great potential and viable future for making profitable investment in Pakistan as the demand of power had registered an increase of 10-12 percent in the country. There is also great scope of investment in water sector as the government is going for construction of mega projects.
The UAE minister expressed great satisfaction over the economic situation of Pakistan and informed the Pakistani side that the UAE had vast experience in the power sector, particularly in combined cycle projection. He further revealed that two power plants would soon be arriving in Pakistan, which had been donated by the UAE to WAPDA for Lahore and Karachi, which would improve power transmission system. Earlier this month, Pakistan's Minister for Commerce Humayun Akhtar Khan chaired a two-day conference which was participated by the ambassadors of Pakistan, Jordan, Lebanon, Syria, Yemen, Bahrain, Kuwait, Oman, Saudi Arabia and the UAE.
The objective of the conference was to frame a strategy for Gulf and Middle East countries with an emphasis on market access, trade promotion and attracting investment, Mr. Khan said Pakistan was not only working hard at reforms but it is outpacing its main competitor India. Pakistan is being viewed as a good investment destination. President Pervez Musharraf himself gets directly involved in assisting investors who come to Pakistan and this speaks for his concern for bringing rapid development in the country.