December 8, 2003	Monday	Shawwal 13, 1424

Numerous new foreign investors, ranging from Saudi Arabian to Chinese, and Pakistani expatriates in the United States, are coming into Pakistan in fiscal 2004, raising the projections of higher, new foreign girect investment (FDI) inspite of rather low flows in recent months.

Besides, capturing the domestic market of nearly 150 million, the new foreign direct private investment is focussed on locating foreign companies in Pakistan which is increasingly turning itself into a production base for the untapped—but huge— markets of Central Asia and South Asia.FDI inflows during fiscal 2003 that ended June 30 this year, rose to $ 798 million, in contrast to $485 million in 2002. It followed on the back of higher economic growth,macroeconomic stablity, financial sector and governance reforms,privatization of state-owned enterprises (SOEs), upgradation of Pakistan government’s foreign debt and financial sector ratings, and some improvement in law and order situation.

The FDI came from the following countries:the United Kingdom $ 219.4 million, the United States $ 211.5 million,the United Arab Emirates $ 119.7 million and Saudi Arabia $ 43.5 million. Other investors were from Japan, Hong Kong, Germany, Singapore, Switzerland, Netherlands and China. This investment went into financial business. Oil and gas exploration and production is now an attractive field. Petroleum Minister Naureiz Shakoor says, over the next two years, foreign companis have committed to invest more than $ 1.0 billion in the sector. Telecom,autos, trade, transport, pharmaceuticals, chemicals, fertilizers and textiles, are other attractive areas.

The investment into financial business was $ 207 million, and $ 153 million in telecom, trade and transport. But, the inflow of portfolio investment stayed rather low at $22 million. However, it was better than the net outflow of $ 8.0 million in 2002, according to the State Bank of Pakistan.

After a record rise to $11.7 billion in the forex reserves, and “the improved risk perception as reflected by recent upgradation of Pakistan’s sovereign rating and secondary prices of Euro Bonds, it is expected, the FDI will gradually pick up in Pakistan,” SBP also says. Despite the fact that FDI inflows during the first four months—July to October—of the current fiscal 2004 tallied up to $ 170.3 million, down from $ 406.6 million in the like period of fiscal 2003, the government analysts still expect, the amount will go up in coming months. Their projections are based on commitments and investment plans announced over the recent weeks, in view of good corporate profitability. Even the national flag- carrier, Pakistan International Airlines (PIA), has just projected its profit for calender year to end December 31, 2004 at Rs. 4.366 billion , up from Rs. 3.334 billion in year to December 31, 2003.

One of the most significant investment plans, just announced by Al-Tuwariqi Group of Companies, Damam, Saudi Arabia, is to establish a steel billets plant at Karachi, near Pakistan Steel Mills. Mr. Liaqat Jatoi, Minister for Industries and Production, says the government has declared the 100-acre location for the plant at Export Processing Zone in order to allow it fiscal and production incentives.

The entire annual production of one millions tonnes of steel billets by this $100 million plant, will be exported to Saudi Arabia. The export potential of the plant is $ 180 to 200 million annually. The plant will be based on the modern technology of a sponge-iron, using natural gas.Its billet melt-shop will be based on electric arc furnace technology and continuous casting. “ The Saudi Arabian company’s investment in Pakistan is a good sign, and a reflection of pro-business policies of the government of Pakistan,”Jatoi says.

Microsoft boss Bill Gates telephoned President Mushraff this week.”Microsoft Corp is examining prospects of investment in Pakistan,” Musharaff said afterwards. The two plan to discuss investment details when they meet in January at Davos, Swizerland at the World Economic Forum. Musharraf also said, “I am pleased at Bill Gates’ investment in IT business in Pakistan. I briefed him about the tremendous potential that Pakistan offers in this field, and informed him of the progress made in IT over the last few years, incentives offered for its promotion, a massive reduction in the bandwidth rates and establishment of an infrastructure network.

Even far-off places in Pakistan are connected to the internet, and the information superhighway, while quality IT institutions are training a large number of people with proficiency in English language who will be an asset to any top global organization,”Musharraf said. Business has long pinned its hopes on investment by overseas Pakistanis to kick-start a new phase of private investment. It is emerging in the form of a new private airline—Airblue. The Civil Aviation Authority, the industry regulator, has okayed Airblue operation. The airline, to begin with, will start flying its three new wide-bodied aircraft to major Pakistani cities in early 2004. It will have an intial investment of Rs. 500 million.Tariq Chaudhry, a US-based Pakistanbi IT expert, is the Chief Executive and Chairman ofthe Airblue. He is assisted by Khaqan Abbasi, the former Chairman of PIA. PIA has a 75 percent market share in Pakistan. Two private Pakistani airlines— Aero Asia and Shaheen Air—share the rest. The Chinese Zonda Bus Co. has just now come to Pakistan to import, assemble and later produce, its buses here.

The company annually produces 20,000 buses in China, with a revenue turnover of $ 500 million, has established a local company, Zonda Pakistan (Pvt) Limited. Mr. Bilal Janjua, its CEO, says the company has already booked orders from big Pakistani transporters in all major cities. It will promote and produce buses in Pakistan. It will also sell the buses in Pakistan and in the Middle East. “We will introduce 49 different models of buses in the demanding Pakistani market. Initially the buses will be imported from China, and establishment of a bus assembly line here is planned within one year,” he announced. Pakistani officials say some of the companies mentioned here are “just a bunch” out of “an encouraging list of prospective investors.” One hopes Pakistan, in particular, succeeds in attracting FDI from their “preferred” investors—like those from U.A.E. Saudi Arabia, the Middle East and other Islamic countries who have large investibale funds and are on the lookout for safe and high-profit countries to park their capital. Pakistan also hopes to attract portfolio investment in its bouyant stock market.

Interestingly, the initial public offering (IPO) of 107.5 million or 2.5 percent shares of OGDCL by the government’s Privatization Commission at Rs. 32 a share, this week, attracted Rs. 27.5 billion —or $ 480 million. Following this heavy oversubscription, the PC has offered an additional 2.5 percent shares for sale.

The total sale of 5.0 percent shares will yield Rs. 6.8 billion —or $ 119 million.The OGDCL’s net revenues in fiscal ended June 30, 2003 were Rs. 45 billion — up 13 percent from Rs. 39.8 billion in 2002. Its after-tax profit rose 23 percent to Rs. 20.7 billion in 2003, as compared to Rs. 16.8 billion in 2002. The oversubscription confirms that the market is starved of good—and new shares— as the people in general, banks, and financial institutions have a big appetite because of piles of liquidity.