ISLAMABAD, Aug 31: The Asian Development Bank (ADB) has asked Pakistan to take immediate corrective actions to improve macroeconomic conditions for attracting private sector investment currently at its lowest ebb.

Phillip Erquiaga, the ADB’s Director General for Private Sector Operations Department, said on Friday that Pakistan had numerous advantages like being located at the gateway to central and south Asia, a fairly fluent English speaking population, strong banking system and strong and robust judiciary and legal establishment considered crucial for international investment.

But a huge circular debt, a credit downgrade by the Moody’s and political uncertainty ahead of general elections were key challenges the government and economic managers should take care of.

He said the ADB’s private sector operations had total outstanding balances and undisbursed commitment to private sector projects in Pakistan amounted to $623 million, as of June 30, 2012, representing over 10 per cent of the total portfolio administered by it in the Asian region while its total portfolio stood at about $1.1 billion in Pakistan.

Assisted by ADB’s Country Director in Pakistan Werner E. Liepach, Mr Phillip said the main purpose of his just concluded visit to Pakistan was to review investment risk mitigation measures for future engagements with Pakistan’s private sector projects in line with the overall development agenda.

He said generating domestic investment was one of the key drivers to compliment international investors and public sector investment for which the ADB provided risk mitigation products, financed mutual funds, leasing companies, investment banks and the power sector.

For example, he said the ADB helped Pakistan’s private sector to have over $5 billion worth of trade guarantees while invested through different products in the power sector and capital markets.

In the power sector, the bank financed Pakistan’s first independent power project in the hydropower, actively pursued gas production and power distribution system and was exploring ways to support renewable energy projects in wind and solar power.

Responding to a question, he said the ADB may not be financing new IPPs in the immediate future, except for renewable hydropower and solar power projects.

About supporting LNG imports, Werner Liepach said the ADB did not have any investment plan for LNG because what was lacking on this issue was the clarity and consistency of policy.

“Unless you have policy consistency and clarity the private sector could not make up their mind for investment plans”.

He said the ADB was providing about $800 million to Pakistan’s power sector this year and planned another $1 billion next year. He said the bank was also providing $500 million for conversion of Jamshoro power project from furnace oil to coal.Phillip said the domestic investment risks should be mitigated by the government to give a clear signal to the private sector that rules of game would not change during the course of transaction and the presumed risk should not change.

He said Pakistan had a robust legal system that gives the private sector confidence. But circular debt was a major impediment to private sector investment.

He said nobody wants to invest unless there was a dependable system of timely payments. “The government should resolve this issue as quickly as possible”, he said.

Regarding security situation, he said it was difficult in many parts of the country and the government was trying to address it.0

Responding to a question, however, he said there was no possibility of improved credit rating before coming elections and hence the investors were adopting a ‘wait-and-see policy’.

He said the increased lending risk in the absence of positive credit rating could make some of the transactions uneconomic.