INTERVIEW WITH SALEEM H. MANDVIWALLA, MINISTER OF STATE, CHAIRMAN BOARD OF INVESTMENT

KHALIL AHMED
(feedback@pgeconomist.com)

Dec 26, 2011 - Jan 1, 20
12

PAGE: TELL US SOMETHING ABOUT THE BOARD OF INVESTMENT (BOI).

MANDVIWALLA: The board of investment (BoI) was established with broad based responsibilities of promotion of investment in all sectors of economy; facilitation of local and foreign investors for speedy materialization of their projects; enhance Pakistan's international competitiveness; and contribute to economic and social development.

The BoI assists companies and investors who intend to invest in Pakistan as well as facilitates the implementation and operation of their projects. The wide range of services provided by BoI includes providing information on the opportunities for investment and facilitating companies that are looking for joint venture.

The BoI acts as a focal point of contact for prospective investors both domestic and foreign to provide them with all necessary information and assistance in coordinating with other government departments/agencies.

PAGE: HOW COULD PAKISTAN ATTRACT HUGE INVESTMENTS FOR ITS ECONOMIC GROWTH?

MANDVIWALLA: There is no second opinion that Pakistan has vast opportunities which the world is not really aware of. We need to tap and approach/target companies and coax them to explore the opportunities themselves to invest in Pakistan. In my experience, companies who visited Pakistan instantly take a positive stance and have changed their opinion/perspective about the country once they land and interact with different organization.

Once they show their interest we require to hold their hands/extend all possible support till materialization of their project. We need to make an investor feel at home and treat their investment as our own investment. If an investor faces any risk or failure it should be taken as a risk or failure of Pakistan. Investors require incentives of all kinds, be they fiscal or non-fiscal and a consistent policy.

Pakistan has huge potential in agriculture power, mineral, infrastructure, and all other sectors. Pakistan's geostrategic location, trained work force, attractive investment policies, and modernized financial sector are the added advantages and motivators that we need to market and let foreign companies know about it on one to one basis.

REASONS TO INVEST IN PAKISTAN

GEO-STRATEGIC LOCATION

Located in the heart of Asia, Pakistan is the gateway to the energy rich central Asian states, the financially liquid gulf states and the economically advanced far eastern tigers. This strategic advantage alone makes Pakistan a marketplace beaming with possibilities.

TRAINED WORKFORCE

A large part of the workforce is proficient in English, hardworking and intelligent. Pakistan possesses a large pool of trained and experienced engineers, bankers, lawyers and other professionals with many having substantial international experience.

ECONOMIC OUTLOOK

Pakistan was one of the fastest growing economies of the world having touched a GDP growth rate of 8.4 per cent in 2005. Today Pakistan has over 180 million consumers with an ever growing middle class. Foreign direct investment has risen sharply from an average of $300 million in the 1990s to over $3.7 billion in 2008-09. Besides, the economic recession in the world and security situation in Pakistan, we are performing better to attract the FDI to the country.

INVESTMENT POLICIES

Current investment policies have been tailor made to suit investor's needs. Pakistan's policy trends have been consistent, with liberalization, de-regulation, privatization, and facilitation being its foremost cornerstones.

FINANCIAL MARKETS

The capital markets are modernized, and reforms have resulted in development of improved infrastructure in the stock exchanges of the country. The securities and exchange commission of Pakistan (SECP) has improved the regulatory environment of the stock exchanges, corporate bond market, and the leasing sector. Whilst the federal board of revenue (FBR) has facilitated structural reform in tax and tariffs and the state bank of Pakistan has invigorated the banking sector into high returns on investment.

According to the World Bank's ease of doing business report 2011, Pakistan ranks higher than Brazil, Russia, India and China (BRIC) countries in most categories.

ECONOMIC TARGETS FOR 2011/12

The target for real GDP growth is 4.2 per cent, with sectoral growth targets of 3.2 per cent for agriculture, 3.1 per cent for industry and five per cent for services. The target for consumer price inflation is 13 per cent.

PAGE: WHAT ARE YOUR VIEWS ABOUT CHINESE INVESTMENTS IN THE COUNTRY?

MANDVIWALLA: Pakistan-China trade and economic relations have a great scope for expansion. China and Pakistan are strategic partners and have been cooperating in the fields of economy, trade, energy, defense, investment, people-to-people contacts, culture, education and other areas. Important projects such as Karakoram Highway, Gwadar Port project, Heavy Mechanical Complex and Heavy Forge and Foundry in Taxila, Chashma Nuclear power plant, and Sports Complex, Islamabad, are outstanding examples of Chinese economic cooperation and assistance to Pakistan. So, we can say Pakistan-China economic cooperation has a long history.

To strengthen the investment relations between the two countries, BoI organized Pak-China Business Corporation Summit with the collaboration of FPCCI, TDAP, and CCPIT China. Almost 260 Chinese delegates and 150 representatives from different investment sectors of Pakistan participated in the summit. Almost 34 memoranda of understanding (MoUs) were signed in different sectors.

Around 83 Chinese companies and corporations maintain permanent offices in Pakistan which testifies to their positive experience in Pakistan. These companies have been engaged in a number of large projects in the energy sector, mining, electronic and telecommunications and infrastructure projects including up-gradation of the Pakistan Railways. These include names like ZTE, China Mobile Huawei Technologies Co. Ltd, BGP (Pakistan) International, Metallurgical Construction Corporation of China (MCC), China Harbor Engineering, China Petroleum, and Dong Feng & Haier.

Under free trade agreement, and the landmark five years cooperation agreement, the volume of trade would be increased to dollars 15 billion in next five years and service sector has also been included in the FTA.

Pak-China investment company has been formed to promote trade and investment between Pakistan and China. China Mobile has made a huge investment to the tune of $700 million in telecommunication sector.

Cooperation between Pakistan and China for the electricity generation through nuclear power is going on, and hopefully it will be increased in future.

Five year development program on trade and economic cooperation between Pakistan and China was signed during the Chinese president's visit to Pakistan in November 2006. The aim of program is to steer and promote rapid, stable and orderly development of the bilateral trade and economic cooperation to broaden the scope and enhance the level of cooperation to achieve a balanced trade with win-win and mutually beneficial results and drive comprehensive socioeconomic development in both countries. Sixty one projects have been indicated in the program for cooperation.

To promote investment in Pakistan by Chinese entrepreneurs, board of investment organized several investment conferences/seminars/forums in China and Pakistan.

The government has planned to establish special economic zone (SEZ) in the country. In this regard, an incentive package for developer of zone and industries to be established in the zone has been approved. Accordingly, BOI has prepared a draft Act for SEZ. To expedite the economic activities between the two countries, government of Pakistan has announced a special policy package for establishment of economic zones including china-Pakistan economic zone (CPEZ).

PAGE: WHAT ARE THE NECESSARY FINANCIAL AND REGULATORY REQUIREMENTS FOR INVESTMENTS IN THE COUNTRY?

MANDVIWALLA: A land of many opportunities,

Pakistan has a distinct blend of almost all economic sectors. Investors enjoy full security, safety, and protection to their investments and are free to choose any activity. A liberal foreign exchange regime allows foreign investors to bring in their capital without prior approval or authorization and repatriate profits, remittances, dividends, royalties, fees for technical services and other legitimate payments overseas at their own convenience and discretion.

There is always room for improvement and the government always welcomes proposals from private sector for improving financial and regulatory framework, which is an ongoing process.

PAGE: WHICH SECTORS COULD GIVE BETTER RETURNS TO LOCAL AND FOREIGN INVESTORS?

MANDVIWALLA: Pakistan is an agri-based economy with a well developed agriculture sector contributing 21.8 percent to the GDP and absorbing an overwhelming majority, 44 percent, of the country's labor force. The country has broad tracts of cultivable land that offer rich harvests and handsome returns to investors. Dairy and cattle farming, meat processing, and value addition ventures offer vast investment opportunities. Investment policy allows 100 percent foreign equity in corporate agricultural farming (CAF) and plant machinery are importable without duty. Although the manufacturing sector has been hit hard by international and domestic factors (rising cost of doing business, demand compression in the export sector, difficult law and order situation), compounded by an acute energy shortage, the government is alive to the fact that this sector contributes 18.5 percent of the GDP and that its vibrancy is of vital importance for Pakistan's economic success.

With this consideration in mind, a policy for setting up special economic zones has been approved envisaging development and operational management of the zones by the private sector with government's facilitation and support.

The incentives are corporate income tax holiday for a period of five (5) years. Existing initial depreciation/allowance of 50 per cent shall be reconsidered to be enhanced to 100 per cent. Federal government/agencies will provide gas, electricity and other utilities at the zero-point of the zones.

Board of investment will provide one window facility to the investors. It is hoped that this initiative would provide the much needed impetus to manufacturing sector. Over the years industrial and domestic demands for energy and oil and gas have grown immensely. Since the whole economic wheel stands at the mercy of these two sectors, the government is pursuing fast track materialization of investments in these sectors.

Additionally, several structural reforms have been introduced to further liberalize the policies governing these sectors. Today, we find a large number of foreign as well as local companies running successful businesses in independent power projects (IPPs) and oil and gas exploration. Services sector has been the most important contributor to economic growth. Reforms introduced by the government have been influential in developing the banking and financial sector. Pakistani banks are amongst the most profitable in the region. Recent acquisitions of local banks by multinationals are evidence of the lucrative opportunities that the banking sector offers.

PAGE: WHAT ARE THE ACHIEVEMENTS OF BOI?

MANDVIWALLA: The recent achievements of BOI and projects facilitated by BOI in the country are as follows:

* 176 foreign and 31 local delegations, organizations,

* companies / individuals were facilitated (average seven per month).

* BOI funds being created with facility from US Creation of Rs25 billion endowment fund for establishment of SEZ.

* Online visa facility has been started to get the business visa without hassle and delay.

S.NO. PROJECT
1. Centaurus Saudi Arabia (Construction)
2. Patrind Korea (Hydropower)
3. Metro Germany (Retail Chain)
4. Makro (Retail Chain)
5. Al Tuwairqi Saudi Arabia (Steel)
6. YKK Japan (Zip Manufacturing)
7. Hyper Star USA (Retail Chain)
8. P&G (Detergent Manufacturing)
9. Coco Cola Germany (Beverages)
10. Zurlu Energy Turkey