LINKING TWO FINANCIAL HUBS - DOHA AND KARACHI
SHABBIR H. KAZMI
Mar 22 - 28, 2010
Qatar is the second richest economy of the world and Pakistan has a market comprising of 200 million people. Pakistan's key sectors seeking capital are oil and gas (exploration and production as well as marketing), financial services, chemical fertilizer manufacturing and power generation, transmission and distribution.
Pakistan enjoys an edge over many other countries because it has two financial systems running in parallel, conventional and Shariah compliant. This offers investors to opt for any of the systems they like. Lately, Qatari investors have established two Takaful operating companies in Pakistan, Pak Qatar General Takaful and Pak Qatar Family Takaful. These two entities are playing important role in gradual shift from conventional risk mitigation entities to institutions offering Shariah compliant solutions.
Ever since Islamic banking began in Pakistan need for entities offering Shariah compliant risk mitigation started to be felt. Since insurance was an integral part of banking, Islamic banks had no option but to accept insurance covers issued by the conventional insurance companies. By accepting such covers, they were contaminating Riba-free income generation. General takaful operators helped in overcoming this weakness and family takaful operators offered an option to those who used to reject conventional insurance and got the hit in case of any mishap.
Under the Shariah compliant products not only commercial banks are offering asset and liability products but modaraba, musharika and murahaba options are also in use. The elaborate infrastructure and comprehensive regulatory framework not only offers security of investment but also modest return. Lately, financial institutions from Malaysia and the Middle East have entered Pakistan in a big way and Qatari's can follow their footprints.
As stated earlier, Pakistan needs to add over 5000MW generation capacity to overcome ongoing load shedding and to support creation of other productive facilities. It is not only addition of the generation capacity but also revamping and upgrading of the existing transmission and distribution networks. Creation of thermal power plants would also require transportation and storage of fuel.
This will also require addition of new refining facilities, capable to producing variety of distillates at competitive prices. While huge capital has to be mobilized for the three refineries being constructed in the country, the existing ones also require massive balancing, modernization, and reconstruction (BMR). In this regard, it is necessary to highlight that Pakistan needs addition of naphtha cracker for production of higher value added products.
Pakistan also needs to add two million tons urea production facilities at the earliest to remain self sufficient in its production. Since price of urea experiences extremes spikes not only the country has to spend huge foreign exchange every year but also pay subsidy to the farmers. This requires guaranteeing price and quantity of gas. Every winter when load shedding of gas has to be undertaken, fertilizer plants are placed on low priority like textiles units that have to be shut down.
Qatar can take care of both the aspects, providing capital for establishing two urea plants capable of annually producing one million tons each and also supplying the feedstock as well as the fuel.
Pakistan has ample cultivable land but suffers from low yield due to inadequate availability of water and bad crop management. Many of the farmers still don't have modern agricultural implements. The green revolution in Pakistan can be ushered through corporate farming. Investment in agriculture can help Qatari's to also secure supply of wheat rice and other cereals. Venturing into sugarcane cultivation can only improve capacity utilization of local sugar mills, operating around 35% capacity utilization but also help in enhancing production of ethanol in the country.
Qatar has become a financial hub and now its outreach can be extended to Pakistan. Qatari investors can take stake in Pakistani commercial banks. Since these banks are in the process of enhancing their paid up acquiring stake offers no problem. Samba of Saudi Arabia and Saroor of UAE have already acquired substantial shares in financial sector. The join venture partners of Pak Qatar Takaful when entered Pakistan had shown interest in expanding their business in Pakistan. Most probably the time has come to revisit their investment strategy.
Pakistan real estate sector also offers huge investment potential. While there has always been demand for low cost housing units, the paradigm shift from individual/stand alone housing units to high rise condominiums has created enormous demand for expensive apartments, particularly in urban cities like Karachi, Lahore and Islamabad.
As construction supports nearly another 50 other industries, greater focus on real estate development would bring boom in other industries also. This will also open the doors for housing finance. The virtual absence of housing finance companies does not allow people to own houses/apartments.
Qatari entrepreneurs can also participate in construction of 'expressways' on BOT basis as well as running public transport system. Otherwise, they can run container cargo train on the track owned by Pakistan railways. Since Pakistan suffers from locomotive engines the investors will have to arrange for engines and tons of loads are there to carry. These are only some of the investment opportunities. Once the first step is taken all the roads will lead to prosperity.