ISLAMABAD, April 29: The Asian Development Bank is working on a package to provide security or terrorism risk guarantees to prospective international investors to pave the way for direct investment in Pakistan.
ADB's country representative Marshuk Ali Shah told a news conference here on Thursday that Pakistan faced a problem of wrong perception and that was why foreign direct investment had generally remained very low in the country.
He said an ADB team had held talks with the government officials in Islamabad to put together a package to provide security or terrorism risk guarantees to foreign investors. Mr Shah expressed inability to quantify the size of the guarantee, saying it was still at the conceptual stage but was confident that it would help a lot to minimize the negative impact caused by the perception about Pakistan.
He said the proposal would be on the pattern of political risk guarantee the ADB was currently providing to foreign investors to the tune of $150 million. ADB's senior economic adviser Navid Hamid said a couple of new emerging sectors like telecom, IT and electronic media were now driving the economy.
In reply to a question about defence expenditure in the wake of a recent Pakistan army's decision that it would reduce its strength by 50,000 troops, Mr Ahson said it was not really a reduction in the total budget but a readjustment of troops to stop higher expenditure. He, however, noted that there had been a decline in defence expenditure during the last 10 years and said the ADB welcomed the trend.
When asked to comment on the ADB's annual report that feared a bank crisis in Pakistan due to a liquidity build-up, both Mr Shah and Mr Ahson said they did not agree with the report.
He said the report, prepared in Manila, had perhaps taken into account the foreign exchange reserves and liquidity build-up but, they pointed out, Pakistan's supervision and monitoring by its central bank was very strong due to years of reforms. They observed that local banks were diversifying into new areas like the SMEs and agriculture.
