ISLAMABAD, Feb 4: The governments of Pakistan and Saudi Arabia have allowed the Saudi-Pak Industrial and Agricultural Investment Company to set up its separate “Asset Management Company” to also mobilise funds from the Kingdom.

“We will receive $160 million (about Rs10 billion) cash for selling our Saudi-Pak Bank in the first quarter of 2008 and through this money we will be launching our own asset management company on a priority,” chief executive officer of the Saudi-Pak Investment Company Rashid Zahir told Dawn on Monday.

He said a decision had been taken to first acquire any existing asset management company which would then be made part of the new company, subject to approval by the regulators.

He said Rs250m initial paid-up capital of the new company would be doubled to Rs500 million as soon as it is established.

Mr Zahir stated that in the new asset management company, Saudi Arabia’s investment will be 60 per cent.

“After having sold out the Saudi-Pak Bank, share-holders’ equity will increase and our resource base will enable us to reduce some of the borrowing and set up some new businesses, including the asset management company,” he said.

He said the Saudi-Pak Investment Company, which is a 50:50 joint venture of Pakistan and Saudi Arabia, has decided to go into the asset management field to enlarge its functions.

Mr Zahir was of the view that the new company would help mobilise funds, both from Pakistan and Saudi Arabia, to promote Saudi investment in the country.

Responding to a question, he said a number of funds for specific purposes, both open and close ends, would be floated by the new asset management company.

He said funds related to industry, business, power and infrastructure would be mobilised by the new company.

He said there was a tax incentive in the asset management business which was helping this sector to grow rapidly.

He said 90 per cent of available funds of the share-holders enjoyed considerable tax incentive in Pakistan in the asset management business.

To another question, he said the new company would be an independent business concern of the Saudi-Pak Investment Company.

The CEO of company stated that Saudi-Pak Real Estate Company had been allowed to participate in real estate projects in the kingdom.

“We have received a general investment authority by the Saudi government to also work in Saudi Arabia,” he said, adding the objective was to establish credentials for the company in the kingdom so that Saudi investors could be adequately attracted to invest in Pakistan.

He said except for two holy cities, the Saudi-Pak Real Estate Company would be working in all other Saudi cities to take part in various projects, including those of infrastructure.

“This will enhance our credibility in the kingdom whose investors are needed to be greatly lured to make substantial investment in Pakistan,” Mr Zahir said.

However, he said the company would have to follow the minimum limit of 30 million Riyals (Rs500 million) to take part in each housing and construction project.

Asked about the Saudi-Pak Investment Company, he said it had earned Rs400 million profit in 2007 despite various economic problems being faced by the country.

Overall, the calendar year 2007 remained good for the investment company as its approvals witnessed 9.8 per cent increase from Rs6.65 billion of 2006 to Rs7.30 billion this year. The long-term financing component which was 44 per cent in 2006 reached 72 per cent in 2007.

The disbursement of funds, which was to the tune of Rs4.8 billion in 2006 reached Rs7.74 billion in 2007, he said.

Likewise, he said that recovery had increased in terms of amount from Rs3.64 billion to Rs5.25 billion in 2007, and as such it registered an increase of 44 per cent.

To a question, he said that development finance institutions (DFIs) were facing tough competition from the banks who were offering credit on low interest rate as their cost of funding was not much.

“In this regard banks are enjoying an edge as they are also offering re-profiling of debt to borrowers,” he said, adding substantial amount of DFIs, including that of Saudi-Pak had been pre-paid.

“Our company received prepayments worth Rs1.5 billion in 2007 and this is something unprecedented,” he said, adding that borrowers had been returning their loans to DFIs before time to seek credit from banks on reduced mark-up.