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Pakistan investment promotion conference.

Pakistan Investment Promotion Conference

The Conference was organised by the Ministry of Industries, Government of Pakistan in collaboration with the World Bank subsidiary, the Multilateral Investment Guarantee Agency (MIGA). In it participated a large number of Pakistani and foreign delegates about 700 in all who were anticipated to explore ways and means to set up joint ventures or 100 per cent equity projects in various economic sectors. In this way, the conference was different from other seminars and workshops which meant simply intellectual discussions and no practical steps toward achieving some ends. On the first day some papers were read. On the second day, thee were workshops on the following topics to promote investment in these fields. Workshop-I Agro-based Industries including textiles and leather sectors; Workshop-II Engineering, Electronic and Electrical; and Workshop-III Chemical including Petro-Chemical.

The third day was devoted partly to group discussions and partly to results of group discussions. The Conference was inaugurated by Mr. Mohammad Nawaz Sharif, Prime Minister of Pakistan. In his inaugural address, the Prime Minister said that the old order has gone but new one is yet to be born and we, during transition, should create better environment for our children and theirs. My Government, in office for the last one year, is making radical changes in foreign relations, economic policies, and domestic affairs. The task is hard due to global economic recession and global economic and political activities affected by unification of Germany and changes in Eastern Europe and Central Asia. The consequent shortage of capital is being compounded by the emergence of trading blocs and the Uruguay Round of Trade negotiations remain deadlocked. There is uncertainty about the restoration of stability to financial institutions, growth prospects of industrial countries, outlook for technology transfer, energy prices and environmental issues. The World Bank anticipates a fall in global level of foreign investment over next 5 years.

We in Pakistan hope better trend. Over the last one year we have overcome difficulties created by large scale nationalization of industry and finances in early 1970's. It has been estimated that the stock of capital in large scale manufacturing in 1978-79 was 22 to 31 per cent less than in 1971-72. In 1980's there was a slow recovery. Confidence built over decades can be shattered in one day but it takes much longer to rebuild. Now industrial sector appears to have an upward trend. Some of the problems have been solved, while new one's are emerging about which we have no experience. But it is encouraging that confidence has been restored. To some extent, this is due to economic reforms and you will be made aware of these during the conference. Reforms have three aspects, namely (i) system of licenses, permits and control has been scrapped; (ii) privatization of a large number of industrial units and banks and induction of private sector into power generation, telecommunications, airlines, shipping, highway construction, port operations, and cargo handling on ports, so far done in public sector. Also have been scrapped, all exchange controls, controls on investment, trade and foreign capital movements and distinction between local and foreigners has been removed.

Foreign investment has been deregulated and there is no ceiling on the share of foreign equity in investments. They are free to invest in the stocks of existing companies marketable securities, or in financial papers. Capital and profits can be freely invested, transferred, or repatriated and there are no limits on payment of royalties or technical fees. In short, there is no difference between local and foreign. Foreign investors in Pakistan enjoy constitutional and legal protection. Present measures are short-term. Long-term measures will be taken under the next Five Year Plan, from July 1st, 1993.

Welcome address was read by Sheikh Rashid Ahmad, Minister for Industries. Like global changes, he said, Pakistan is shifting from state enterprises to private sector dominance. Steps have been taken for rapid and smooth industrialization. In addition to plans for handing over about 115 state enterprises to private sector, new investment fields have been opened to them, so far meant for only public sector. Some fundamental changes have been made in the Ministry of Industries. From now onward, the Ministry will not interfere in private sector affairs except for quality assurance, safety, security and environment considerations. Industrial Investment schedule has been replaced by Pakistan Investment Guides, which provides all information needed by the investors. Other material is also being provided to the Conference.

Federal Secretary Ministry of Industries also welcomed the Conference participants. He said that when the present Government took over the administration, country was faced with several economic problems and later Gulf crisis added some more. To overcome these problems a number of committees were appointed with private sector participating there. As a result, a new industrial policy has been formulated. As a result of this policy, present Conference has been organised in collaboration with MIGA. It will not only highlight investment opportunities in Pakistan but will also help local and foreign investors to interact with each other and with Government officials concerned.

In recent past foreign private investment was seen with suspicion but now most of the developing countries are competing for it. Foreign investment not only add to scarce resources but also latest technology and wider market. In Pakistan, suitable environment has been created for indigenous and foreign investment. One of the objectives of present policy is to achieve the goal of self-reliance. Some of the steps taken in this connection are the liberalization of industrial policy, introduction of rural industrialization schemes, deregulation of sanctioning process, privatization of public sector enterprises, and foreign exchange reforms.

The opening session was also addressed by Mr. Ghassan El-Rifai, Vice-President, Policy and Advisory Services, MIGA. This is the 4th Conference organized by MIGA and the first in Asia. Foreign direct investment is not only a non-debt creating form of capital but also it provides a package of management and organizational skills, technology and marketing know-how. In recent years Pakistan has succeeded in attracting direct investment. Foreign direct investment increased from an annual average of $60 million during 1980-84 to $150 million during 1985-89. In nominal terms, the annual increase was 20 per cent against the global developing countries average of 9.5 per cent.

Strategic location of Pakistan should attract foreign investment. Foreign businessmen operating here not only have an access to a large domestic market, but also to the much larger markets of Gulf, Eastern Africa and Central Asia. Moreover, Pakistan has rich human and natural resources. Despite increase in foreign investment, Pakistan's inflow is still small as compared to some of the other Asian countries. However, it provides great opportunity to foreign investors. During the last one year bold economic reforms have been introduced here. Privatization and deregulation policies are in addition. There are some problems also which should be solved. Over 200 projects in private sector exceeding $ 1 billion in investment opportunities have been identified. Then Mr. Rifai gave a description of MIGA.

Papers

A number of papers were read in the on ference some of which are summarised below, Mr. T.Z. Farooqi read a paper on industrialization in Pakistan. He treated developments since 1947. Initially, the emphasis was on consumer goods industries and the private sector played an important role. As private sector was reluctant to invest in sophisticated industries, the public sector stepped in. PIDC was set up in 1952. Major object was to set up industries to transfer these to private sector, Since 1955, five years plans have been launched. The share of industry in GDP, employment, exports, etc. increased gradually. Some problems were faced during 1970's. From 1977, the emphasis shifted from public sector to a blend of private and public sectors. Since 1990, emphasis has again shifted to private sector. Then the speaker mentioned economic reforms and incentives.

The Finance Secretary, Qazi Alimullah gave an overview of the economy. The paper had three parts. In part I, economic reforms are narrated and in Part II. economic situation is described. Future outlook is given in part III, Initially he described economic situation since 1947. In 1990-91, GDP grew by 5.6 per cent mainly due to agriculture and industry. Exports increased by 18.7 per cent and imports 12.3 per cent. Current account deficit increased to $2.1 billion. Home remittances also declined. Inflation, monetary expansion and fiscal deficit were the other weak points.

Mr. Yusuf H. Shirazi Chairman Atlas Group of Companies read a paper on "Foreign Investment in Pakistan" which was highly informative. In october 1983, Pakistan was considered inappropriate for foreign direct investment. Despite that Pakistan economy has advanced well since then. The GDP has grown 6 per cent a year and the share of manufacturing in GNP has increased from 14% to 20%. Agriculture has contributed about 24%. Exports have grown faster than imports. Pakistan heads the list of global exporters of cotton and cotton yarn. Then he described the activities of Pakistani entrepreneurs. He gave details of the activities of his own company. At the end he gave a description of global trends.

Mr. Salman Farooqui, Secretary Ministry of Communications, read a paper with two major topics, namely (i) Communication Infrastructure in Pakistan, and (ii) the Labour Market in Pakistan. In it he described the development of national highways, ports and shipping, and the development of telecommunication system. In the next 18 months, 500,000 new telephone lines will be added to the national system. Last year 250,000 telephones were added, an increase of 25%. Postal services have also been improved. Then he described human resources of Pakistan.

A representative of the Asian Development Bank read a paper on "Perspective of the Asian Development Bank. Initially he commented on the Government regulatory reforms and their meaning for investors. Then he described the role of Asian Development Bank and the Bank's attitude toward projects for private investment and the policy areas where the Government of Pakistan should take further actions. Similar views were expressed by a representative of the World Bank.

Mr. Inamul Haq Chairman NDFC read a paper on "Financing of Industrial Development Projects in Pakistan". Dramatic changes have taken place on earth during the last one decade and Pakistan has been no exception. Economic policy changes are still taking place at home and abroad. Freedom is increasing for saving, investment, production, creation, and innovation. In the light of these changes, the speaker gave a detail of industrial financing in Pakistan. He particularly put emphasis on fiscal policy, monetary policy, exchange policy, exchange control, foreign investment, capital markets, privatization, liberalization and deregulation and their impact on industrialization.

Mr. S.R. Poonegar, Secretary Water and Power read a paper on "Infrastructure with reference to Power Generation in Private Sector". Alongwith description of energy situation in the country, he described the role of private sector in power generation. He said that the Government was encouraging private investment-local and foreign - in power sector.

Another paper was read by Mr. Jamalud-Din Kassam, Department of Investment, Asia II of the International Finance Corporation. There were three parts of his paper. First part pertained to the Government of Pakistan's private sector initiatives. In the second part he gave an overview of the IFC and its experience in Pakistan in Pakistan. Last of all he gave IFC's perspective on prospects for investing. He appreciated Government measures to encourage private investment in Pakistan. At the same time he said that much more remains to be done. The IFC has so for made investment of about $400 million in 40 private projects. The corporation is investing around $60 million a year and at present, IFC's commitments to be disbursed are $140 million. About future, he said that the prospects are very good for private investment.

Results

The results of the conference have been encouraging. About 400 investors from 40 countries participated in the conference. Negotiations were carried out between local businessmen and foreign investors. Firm commitments were made through exchange of letters of intents between the joint venture partners to the tune of $600 million. In addition, there were some projects, about which agreements in principle were reached. Total amount of foreign investment could be $ 1 billion.

PHOTO : Prime Minister Mohammad Nawaz Sharif delivering inaugural address at the Investment Promotion Conference in Islamabad
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Author:Khan, Abdul Majid
Publication:Economic Review
Article Type:Cover Story
Date:Nov 1, 1991
Words:2044
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