March 4, 2002	Monday	Zilhaj 19, 1422

THE Overseas Private Investment Corporation (OPIC) of the US has begun evaluating five investment projects worth $200 million. Two of these are energy projects, one of software and two small enterprises.

The OPIC has already announced $300 million credit line for projects in Pakistan. Meanwhile it has been learnt that Japan is all set to invest about $300 million in various projects in Pakistan.

An announcement to this effect is expected to be made during the forthcoming visit of President General Pervez Musharraf to the country of the rising sun. Pakistan has also lined up a number of projects for privatization. These include the Pakistan Telecommunication Corporation Limited (PTCL), the Karachi Electric Supply Corporation (KESC), the Oil and Gas Development Corporation (OGDC) and the Pakistan State Oil (PSO). Except for the KESC, the rest of these four projects are highly profitable enterprises. The OGDC alone is making an annual profit of about $300 million. Two of the public sector banks— the Habib Bank Limited and the United Bank Limited— are also on the block for sales.

Other projects which are likely to be taken up in the future include the three pipeline projects—the Iran-Pakistan, the Qatar-Pakistan and the Turkmenistan-Pakistan pipelines— to meet the growing demand of energy in the country. The Iran-Pakistan pipeline is also expected to be extended in due course of time to India.

The government claims that the privatization process did not take off quickly because of the time it has taken to set in place regulatory frameworks, a comprehensive privatization law which should ensure a transparent process. It has also blamed the litigation the government had inherited because of the flaws in the privatization process for the delays in launching the privatization process in right earnest. The government claims that by setting in place the regulatory framework for oil and gas, fertilizer, telecom and in other areas a level playing field was now available for all the investors who wanted to participate in the privatization process.

If all those projects which the OPIC has already identified and the ones which Japan proposes to take in hand plus the gas pipelines, the six privatization projects and the mega projects announced by the President on August 14, 2001 are launched quickly and are made to dovetail with the launching of the rehabilitation and reconstruction work in the neighbouring Afghanistan, then the economic activity in the two countries is likely to generate thousands of jobs and billions in government revenues in both the countries.

As a result in Pakistan, the annual oil import bill alone will shoot up to $5 billion within three years and the gas consumption would go up by at least 10 per cent annually from the present 2061 mmcfd with the bulk of it going to power generation.

What, however, is missing from this happy investment scenario is the reality on the ground. First, the law and order situation. In October when the war against terrorism had just begun, the country faced the tragedy of massacre of Christians in a church in Bhawalpur. So far the police has failed to trace the culprits who perpetrated this horrendous attack on innocent people. Next, a reporter of the Wall Street Journal, Daniel Pearl, was kidnapped and murdered after making rings around our law enforcement agencies and even making President Musharraf look as if he was not in full control of things as he had kept insisting that there was an Indian hand in the crime and that he was reasonably sure that Pearl was alive and his agencies would recover him soon.

A video showing how Pearl was killed is now in the hands of the police but still they do not know who had actually committed this crime and where the body of the murdered journalist is. The third incident which seems to have shaken this government to its roots happened last Tuesday in Rawalpindi only a stone’s throw from the all-powerful GHQ. So far nobody knows who had committed this terrorist attack in which 11 Shias were killed. The police is corrupt to the core. It is ill-paid and ill equipped. And it is also being accused masterminding various crimes in the country. So with this kind of police, it is almost impossible to curb crimes, what to talk of terrorism. And as long as this situation does not get improved there is hardly any possibility of the foreign investor becoming involved in the country’s investment activity beyond evaluation.

The other factor which perhaps is more important is that of the resources. So, far the government has not been able to take in hand more than a couple of the mega projects it had announced on August 14, 2001. This is because of the declining trend in revenue collection and exports. There was this hope that accelerated privatization would bring in part of the needed finances but so far this dream has also remained no more than a dream. In fact despite all the official claims of having put in place everything that is needed to attract buyers and created the environment for accelerated privatization, there is not going to be any sales at least in the near future because of the uncertain situation in the region which has been made even more uncertain by the Indian army’s deployment at the borders.

And finally, there is a world-wide recession. And in such situations investors tend to become too conservative and look for places where the risks are not as much as they are in Pakistan. Even the reconstruction and rehabilitation work in Afghanistan has not been commenced because all the moneys that were promised by the donors at the Tokyo conference in early January have so far remained only promises.

The Afghan government today is faced with the problem of paying salaries to its employees. It is therefore more interested in scratching the barrel for salaries rather than looking for mega dollars for reconstruction. No doubt there is so much to be done in Afghanistan but unless the money committed in Tokyo starts coming in even in trickle and the peace force takes over the country completely no reconstruction work is likely to be started in a hurry.