SINGAPORE'S GROWING STAKE IN PAKISTAN
SYED FAZL-E-HAIDER, QUETTA
Aug 20 - 26, 2007
Singapore has increased its stakes in Pakistan over the past few years. It has already purchased strategic assets in the country's banking, telecom and ports and shipping sectors. Tamasek Holdings- the investment arm of Singaporean government worth over $90 billion- is currently looking to launch a mass self-employment scheme in Pakistan following its success in Indonesia, Malaysia and India.
Pakistan offers a vast investment canvas in a deregulated, liberal economy driven by the private sector. Its improved international credit rating based on its economic performance and innovative policies would even attract more foreign investment and double the size of the economy in dollar terms in another six to seven years. The country's unique position as a gateway to Western China and Central Asia provides investment opportunities especially in banking sector to set up its infrastructure at grass route level to tap potential and create a viable economic thrust for converting human resources into engine of economic growth.
Temasek Holdings has set up pilot projects in Pakistani provinces of Sindh and Punjab for collecting data to conceive a financial model based on competitive support to increase production capacity of the people at grass-root level, generate self-employment, commercial activity and promote SMEs in the rural areas of the country. Temasek Holdings, according to its CEO Madam Ho-Ching, will also create investment and banking infrastructure at the district and village level to promote housing sector, real estate and augment income for self-employed people such as barbers and fishermen through financial schemes. It would also encourage establishment of labour cooperatives to improve their lives and to raise their standard of living.
NIB Bank, a subsidiary of Temasek Holdings, has already signed a takeover agreement with the Pakistan Industrial Credit and Investment Corporation (PICIC) and purchased its 56 percent shares for Rs 78 per share. After this takeover, the NIB Bank has become the second largest private bank of Pakistan with foreign ownership. The acquisition of PICIC allows NIB to position itself as a dominant player in the financial sector of Pakistan, covering the fields of commercial banking, investment banking, asset management and insurance. It is the third biggest banking deal in Pakistan's history. In terms of amount, it is the second largest deal.
Temasek group, which has major shareholding in the NIB Bank, will have to pay around $372 million for PICIC deal, out of which it would generate $306 through right shares and $66 million through issuance of term finance certificates (TFCs) in the local market. The NIB signed agreements with different shareholders of PICIC to buy 56 per cent stakes for a total amount of $300 million. It signed accord with National Investment Trust Limited (NIT) that possessed 15 percent shares of PICIC.
PICIC Commercial Bank Limited was incorporated in 1993 as Schon Bank Limited and commenced its business in April 1994, with a paid-up capital of Rs. 500 million. It has financed at least 1,300 industrial projects throughout Pakistan with gross financial assistance of Rs 38.5 billion. It offers a rich suite of financial products for its customers. It has a strong financial base with authorized capital of Rs 2,000 million and paid-up capital of Rs 1,004,043 million as of June 30, 2003. Besides share capital, the PICIC's resources are derived from borrowings, both in foreign and local currencies. Borrowings in local currency include borrowings from the Government of Pakistan and the State Bank of Pakistan. PICIC also plays a key role in the capital market development through direct purchase and underwriting of shares.
Last month, while addressing the ceremony to mark NIB Bank's acquisition of a majority shareholding in PICIC, Madam Ho-Ching appreciated Pakistan's economic reforms and reposed its confidence in the policies of the government. She said, "Our early investment in NIB Bank and now in PICIC gives us a broad-based exposure to this growing economy via the financial sector". She emphasized that Temasek has a positive long-term view of Asia and the group has doubled its exposure to Asia from 19 per cent to 39 per cent over the past two years.
Temasek investments in Asian banks have lifted financial services to account for a third of the group's $84 billion, in assets. In Pakistan, Temasek is competing with Standard Chartered and Citigroup for banking assets and customers. The Singaporean group had offered the highest bid for PICIC.
Singapore Telecommunications Limited (SingTel) and Warid Telecom, a private telecom operator in Pakistan recently entered into a definitive agreement subsequent to which SingTel will acquire a 30 per cent equity stake in Warid Telecom. Under the deal, SingTel will invest US$758 million to acquire a 30 per cent stake in Warid Telecom, valuing the company at an enterprise value of US$2.9 billion. The investment is the part of a strategy to support Warid Telecom's continued growth and enhance its market position. Warid Telecom is part of the Abu Dhabi Group.
Warid Telecom launched its services in Pakistan in May 2005 and since then it has sustained a very rapid expansion. Within two years, it has reached nearly 9.7 million in reported subscriber numbers. It is the third largest mobile operator in Pakistan, with a market share of 16.6%, as of April 2007. The company has a 15-year license to operate GSM-based mobile services in Pakistan, Azad Jammu and Kashmir, and the Northern areas. It has over the last six months more than doubled its investment in the expansion of its network and capacity in order to meet the rapidly growing demand for its services.
SingTel is the leading communications group in Asia with operations and investments around the world. It provides a comprehensive portfolio of services that include voice and data services over fixed, wireless and Internet platforms. It has a network of 37 offices in 19 countries throughout Asia Pacific, Europe and the United States. It has major investments in Bangladesh, India, Indonesia, the Philippines and Thailand. It has significant operations in Singapore and Australia. The company had a turnover of US$8.40 billion and net profit after tax of US$2.42 billion for the year ended 31 March 2007.
Warid Telecom is poised to benefit from SingTel's technological and commercial expertise and its international experience and knowledge in different aspects of operating a telecommunications business. Warid Telecom hopes to achieve synergies in the areas of procurement, marketing, international roaming, network planning and product development which will ultimately benefit its customers in Pakistan.
PORTS & SHIPPING
Another Singaporean company, Port of Singapore Authority (PSA) International is the operator of Pakistan's strategically and commercially important Chinese-built Gwadar port in Balochistan province. Under the concession agreement, the PSA International would run the port for 40 years and is committed to invest $550 million over the next five years.
The PSA is committed to installing two additional quayside gantry cranes for the handling of containers by the end of this year. It will also undertake construction of 14 more berths in a 4.5-square-kilometer area beside the existing three berths. The cargo-handling capacity of Gwadar port will be expanded by up to 300 million tonnes from the current 50 million tonnes within the next two decades.