GROWING UAE-PAKISTAN ECONOMIC RELATIONSHIP
SHABBIR H. KAZMI
Nov 16 - 22, 2009
Pakistan and the United Arab Emirates (UAE) enjoy extremely close relationship based on deep-rooted cultural affinities, shared faith and traditions. The consolidation in relationship is also due to geographic proximity but more due to identity of interests.
These relations date back to the UAE's formation in 1971, and have since evolved into wide-ranging cooperation in various fields. Pakistan was the first country to accord formal recognition to the UAE on its achieving independence. Bilateral relations and mutually beneficial cooperation have progressed steadily ever since.
UAE has been a major donor of economic assistance to Pakistan. Pakistan has contributed very significantly in to the evolution of key institutions in the Emirates such as armed forces, police, health and education, and the same has been reciprocated in the friendly manner to the full satisfaction of Pakistan. The two countries enjoy commonality of perceptions on major international and regional issues of the mutual concern.
The regular and frequent visits and bilateral consultations between the two countries are reflective of the fact that the two countries have not only laid strong foundations of mutually beneficial relations, friendship and peaceful cooperation but the relationship has been further cemented over the years.
Over a very brief span of time the UAE has emerged as one of Pakistan's major economic and trading partners. A large number of Pakistani expatriates, about half a million, are gainfully employed in UAE. The Pakistanis living there have been contributing in a significant manner in the promotion of bilateral understanding and to the economy of Pakistan through their home remittances.
UAE is making huge investments owing to the increase in oil prices which have led to additional US$400 billion petro-dollars entering the oil producing region of which the UAE is an active member. Lately, the UAE invested US$3 billion into Pakistan, which when compared to the US$400 billion seems too insignificant. However, Pakistan remains its first choice as the market of the country is not saturated like that of most other countries and it being a third world country offers better economies of scale than the western countries.
Major groups from the UAE have participated actively in Pakistan's privatization program. They have already invested millions of dollars in various sectors of Pakistan. These include housing and real estate, telecommunication, banking, mineral exploration, oil and gas, information technology and tourism. Other UAE investments in Pakistan are in the fields of airlines, financial business, hotels and tractors.
The two most notable investments made in Pakistan lately are acquisition along with management control of Pakistan Telecommunication Company by Etisalat and Warid Telecom the fourth largest mobile service provider in the country. Wateen, a subsidiary of Warid Telecom, has earned a milestone in the telecommunication industry by becoming the first to introduce Wi-Fi (wireless) internet into Pakistan which is also being well received by the public.
In the financial sector, Abu Dhabi Group acquired two major commercial banks in Pakistan these are Bank AlFalah and United Bank, while investors from Dubai joined the bandwagon with Dubai Islamic Bank and Emirates Global Islamic Bank arrived. In insurance sector there was an investment from Takaful Pakistan.
In the real estate projects, Al-Ghuran, a UAE based real estate entity, plans to invest Rs45 billion in constructions and real estate business in the near future. Similarly, Al-Ghurair Giga's multi million Goldcrest DHA Islamabad project is going ahead according to the schedule.
Emaar has also entered Pakistan in a big way and work has been going on at multi purpose projects worth US$2.4 billion in Islamabad and Karachi which would be completed over the next five years. Emaar and Pakistan's Port Qasim Authority are also in the process of undertaking a mega joint-venture project to develop an area of 12,000 acres of land into a modern city near Karachi.
Lately, Pakistan and the UAE have entered into a landmark agreement envisaging construction of US$5 billion oil refinery at Balochistan and renewal of soft loan of US$265 million for the construction of dams in Pakistan.
Refinery is commonly known as Khalifa Coastal Refinery. Abu Dhabi government-owned International Petroleum Investment Company (IPIC) has 74% stake while Pakistan's Pak-Arab Refinery (PARCO) will hold the remainder. This is the largest single country commitment for investment in different sectors of Pakistan's economy and has the potential not only to make UAE one of the major economic players but would also open up new vistas of development in Pakistan.
Pak Arab Refinery (PARCO) is a joint venture between government of Pakistan and the Emirate of Abu Dhabi. The entity has been incorporated as a public limited company in 1974 in Pakistan. Government of Pakistan holds 60% of the share whereas Emirate of Abu Dhabi holds 40% stake in the name of Abu Dhabi Petroleum Investment Company, a subsidiary group of International Petroleum Investment Company.
The major business activities of PARCO include refining, transportation, storage and marketing of energy products. It is an integrated energy company, and a key player in the country's strategic oil supply and logistics. It has refining capacity of 100,000bpd and combined storage capacity of over one million tons. In marketing, it operates as a joint venture with TOTAL of France, has a technical support arrangement with OMV of Austria, and a distribution agreement with SHV of Holland.
PARCO has emerged as the strategic fuel supplier to the country having the largest refinery and 2000 km long cross country pipeline network. PARCO has been able to realize a number of energy projects that have contributed significantly in enhancing the country's economic growth, saving foreign exchange, transferring technology and providing employment.
It has retained its AAA and A1+ long and short term credit rating by PACRA for eleven consecutive years. The company became the first to obtain three simultaneous international certifications: ISO 9001:2000 (Quality Management System), ISO 14001:2004 (Environmental Management System), and OHSAS 18001:1999 (Occupational Health and Safety Management System).
PARCO has laid down three pipelines of strategic importance. 1) Karachi-Mahmood Kot Pipeline is 870km long and commissioned in 1981. It transports crude from Karachi to Mahmood Kot near Multan for its mid country refinery. Its initial annual pumping capacity of 2.9 million has been upgraded to 6 million tons per year. 2) Mahmood Kot-Faisalabad-Machhike Pipeline was commissioned in 1997 and 362-km long. It transports refined products like diesel and kerosene to Faisalabad and to Machhike. 3) The US$ 480 million, white oil pipeline is the mega infrastructure project implemented by PARCO.
After dedication of the first pipeline for crude oil transportation, the white oil pipeline is being used for the transportation of refined petroleum products to the central and Northern regions of Pakistan; which account for almost 60% of the total petroleum consumption in the country.