KARACHI, March 28: The Asian Development Bank plans to provide a security risk guarantee against sabotage or terrorism to foreign firms that are willing to invest in Pakistan, a top ADB official said on Monday. “We have submitted our proposals to the Pakistan government, and the scheme will be launched after their approval,” Marshuk Ali Shah, chief representative in Pakistan of the Manila-based ADB, told Dow Jones Newswires in a telephone interview from Islamabad. He said under the scheme, the bank would provide a risk guarantee to foreign investors against possible terrorist attacks or sabotage.

“It will work as an insurance scheme,” Shah said, adding a foreign investor would have to pay 0.5-0.6 per cent of its total investment to the bank to avail the guarantee.

He said the planned scheme would be limited to foreign firms.

“The idea is to attract foreign investment to Pakistan.”

Though foreign direct investment has risen by 55.3 per cent to $597.6 million in the first eight months of the fiscal year that began July 1, foreign investment inflows have been below international levels because of risk perception.

Shah said domestic investors wouldn’t be eligible for the scheme on their own; they would be eligible only if they are investing in a joint collaboration with foreign partners.

The proposed scheme will run parallel to the bank’s political risk guarantee scheme, under which domestic investors can seek risk guarantees against changes in government’s policies, he said.

The bank is “actively pursuing” the development of the private sector and a larger role in economic development through public-private partnership, Shah said.

As part of its efforts, the ADB plans to directly issue the equivalent of $350 million of local currency bonds under the Public-Private Infrastructure Fund, which is still awaiting the government’s approval, he said.

Under the plan, funds raised will be provided to banks to lend to the private sector for long-term infrastructure projects.

The ADB also plans a rupee-dollar swap valued at $250 million with the State Bank of Pakistan to obtain rupees that will be used for funding guarantees on long-term infrastructure projects.

“We have completed our paperwork, and we will launch the fund within two to three months after a green signal from the government,” Shah said.

He said the bank is focusing on infrastructure development with a view to assist Pakistan in achieving higher economic growth.

“Infrastructure development is one of the key focus areas,” he said, adding the bank provided $800 million in 2004 for the development of roads and infrastructure.

The ADB has already proposed an integrated approach to investment in roads, livestock, education, health and human development.

“We have provided on an average $950 million in loans each year in the last three years for different projects in Pakistan,” Shah said. — Dow Jones Newswires