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New projects with foreign equity.

INTRODUCTION

Pakistan has liberalised its foreign investment policy by reducing regulatory and procedural impediments and thereby promoting access to the Pakistani market. These include:

* Foreigners are allowed to invest up to 100 per cent of equity without prior approval in most sectors. Free and unrestricted repatriation of capital and income from shares is also allowed.

* Foreign manufacturing companies who export 50 per cent or more of their production can obtain working capital loans from domestic financial institutions without prior approval. Other foreign controlled manufacturing companies can obtain loans equal to their equity while capital expenditure requirements can be met by loans from domestic financial institutions or by the issue of Participation Term Certificates.

* Branches of foreign companies with certain exceptions can remit profits without permission while overseas Pakistanis can make investment on repatriable basis in shares of listed companies against payment in foreign exchange.

* Industrial undertaking can obtain foreign loans without restrictions when government repayment guarantees are not required.

* Foreign currency account holders receive a premium above the LIBOR rate, thereby increasing the incentive for holding foreign currency in Pakistan. Dollar bearer certificates have also been introduced.

Equity - related capital flows in the form of portfolio investment as well as direct foreign investment have increased in response to the liberalisation policy.

The present report gives details of some of the project recently concluded. One important project is Hub Power Project worth $ 1.8 billion. The project was led by Xenel Industries of Saudi Arabia. The project will be designed, constructed, owned and operated by the Hub Power Company Limited, incorporated in Pakistan.

Pak Azeri

A first-ever joint venture company between Pakistan and the newly independent Soviet Republic Azerbaijan has been formed to start economic activities in the fields of oil exploration, road construction and power generation.

The initial paid-up capital of the joint company is Rs. 10 million of which 60 per cent will be contributed by Huffaz Group while 40 per cent will be pooled by Daniz Association.

Rawalpindi-Peshawar Motorway

The feasibility study for the Rawalpindi-Peshawar and Gwader-Karachi segment of Pakistan Motorway is afoot and its report is expected to be submitted prior to the completion of on-going under construction Islamabad-Lahore section of the project.

Prime Minister Nawaz Sharif inaugurated the Rs. 24 billion worth project on January 11 and named it as Pakistan Motorway project. The Motorway will help boost the economic development of the country and open up new vistas of prosperity by integration all four provinces. The contract for the Islamabad-Lahore section of the project has been awarded to South Korean Daewoo Corporation.

The 340km long segment promises 5,000 jobs for Pakistanis while the contracting agency will bring only 91 engineers. Moreover, by contract the Koreans will impart training to the host's personnel as well. South Korea investment accounts for the 40 per cent of the total cost incurred on the segment while rest of the expenses would be met through local resources. The project will eventually be made self-financing by toll taxing. The final decision for the amount of the tax, however, has not been made as yet.

The repayment period for the foreign investment, is 12-1/2 year while all expenses will be recollected, by levying toll tax over a span of six to seven years. After completion of the project the road machinery worth Rs. 400 crore brought by the Koreans will be gifted to National Highway Authority without any payment.

Pak-Iran Refinery

Preliminary work on the establishment of an oil refinery by Iran in Pakistan is progressing satisfactorily. Experts of the two countries are working closely in finalising the feasibility report relation to the financial aspects and technicalities. This was stated by the Iranian Ambassador Jawad Mansouri, while informally talking to newsmen. He said the refinery will take four years to come up as soon as the basic formalities are finalised.

Pak-Qatar Gas Project

Government of Pakistan has approved one of the largest gas projects costing 3.5 billion dollars for import of natural gas from State of Qatar to Islamic Republic of Pakistan and a memorandum of understanding with a foreign petroleum company is being signed within few weeks for this purpose. Memorandum of understanding (MOU) will be signed with Crescent Petroleum Company of Sharjah, United Arab Emirates which will prepare feasibility study of the "Gulf-South Asia Gas Project" within a period of 18 months at a cost of 8 million dollars.

Oxy-POL Accord

A new dimension has been added to the exploration of oil and gas in the country through an agreement signed between the Government of Pakistan, Occidental of USA (Oxy) and Pakistan Oilfields (POL). The agreement aims at the recovery of residual oil from the oil depleted Balkassar field in Potwar region some 90 kilometers southwest of Islamabad by the application of advanced technology.

The production from the field discovered in 1946 by Attock Oil Company would be increased to 10,000 barrels by an investment of 100 million dollars which had dropped to 400 barrels per day (BPD). The project the first of its kind in the country will be implemented by Occidental which is already a major producer of oil and gas in Pakistan.

Plastic Card Plant

AG, Switzerland Printoplast has decided to set up a plastic card production plant in Pakistan with a view to meet entire need of Pakistan, Muslim countries and Third World. Project cost Rs. 100 million. There is enough room to export plastic cards to Europe, United States and Canada, Muslim and Third World countries. It is estimated that the business in Pakistan will grow to Rs. 6 billion in next 5 years.

The annual world export probability will grow to another Rs. 500 million. Invitations have been extended to very serious Pakistani sponsors who are willing to fulfil all conditions of Printoplast AG and do not need time to decide. Karachi Stock Exchange also approached through their agent which possibility cannot be ruled out to make it public. The concept of plastic card is basically to eliminate paper currency one hand which on the other provides a highly secured card for national ID card, licenses for various purposes, car registration, national health card, national insurance card. The estimated number of cards required in Pakistan in next 5 years will be 300,000,000. The foreign export possibility will be another 300,000,000. It will eliminate paper currency to the extent of 90 per cent.

Daewoo Complex

The Korean industrial giant Daewoo has reached an agreement with the Ministry of Industries to set up a industrial complex in special industrial zone in Bin Qasim area where they would set up a complex of 20 industries and bring in other Korean companies.

Giving details of the proposed investment Secretary Industries T.Z. Farooqi said that in the first phase Daewoo would install six industries to be followed by other units in the second phase which includes hi-tech in chemicals, engineering and electronics.

The first phase will include an integrated textile unit of 70,000 spindles in two parts, leather tannery with its products including shoes, stainless steel, autoparts which ultimately will culminate in setting up an automobile unit. Already Honda of Japan announced in Tokyo the proposed setting up of Atlas Honda with Shirazi as a partner. It is learnt that the package of incentives for special industrial zones which was proposed in the budget and later modified by an inter ministerial committee has seen some further modifications.

As a result of the discussions, the Korean investors would get land and water at the rates available in the export processing zone. Originally the charges for both were higher. The government has ensured an uninterrupted supply of electricity which would mean that the area would be connected with two independent power stations. Details of the deal would be known later. It is assumed these incentives and concessions would be available to all such foreign investors in the special industrial zones.

Pakeeza Canada Ltd.

The Canadian firm will help develop dairy industry in Solar Energy in the Punjab under an agreement. The agreement between Pakeeza Canada Limited of Ottawa and A.A. Brothers Limited of Pakistan is for a period of 20 years. The Pakistan High Commission in Ottawa hosted the signing ceremony. An official statement said the first shipment of Canadian holsteins was expected to arrive in Pakistan by the first week of November, Bovine Semen will also be available for sale to Pakistani dairy farmers at the farm of A.A. Brothers Limited in Faisalabad. A Canadian showcase of Solar Energy will be completed and exhibited by November at the A.A. Brothers Farm.

Pak-Finish Venture

Finland, in collaboration with two local business houses, is establishing a fertilizer plant at Port Qasim. Kemira Oy a fully state-owned company of Finland and one of the major fertilizer producers in Europe is participating in setting up a fertilizer plant in Pakistan in Partnership with two local partners, BRR Group and Interglobe. Giving details Pekka Suppanen, Vice President and Lars Westerstrahle, Director Export of Kemira oy informed that the proposed plant BRR Fertilizers will be set up in Port Qasim area for which land has already been acquired. The total capacity of the plant, which will produce NP 23:23:0 and different grades of NPK will be upto 300,000 tons per annum. The fertilizer plant project will be coordinated by Kemira. All the necessary Government approvals have been obtained.

Schon Group Refinery

Work on the construction of 35,000 barrels per day (BPD) refinery by Schon Group at Port Bin Qasim would start soon, as the machinery for the proposed refinery was on its way, Ministry of Petroleum and Natural Resources has already issued a letter to the sponsors, entitling them to the concessional import duty at 5.5 per cent for all the equipment. It is a second-hand refinery procured by the sponsors from an American firm and would be installed by Messrs. Hobbs-Bannerman under a turnkey contract which provide for refinery to go into operation by January 1994.

The refinery would be geared to refine the waxy crude of Badin oil field being operated by Union Texas which is currently exporting it to Singapore for the refining capacity of crude of this specifications. The refinery would also be free to import crude, after lifting the local crude allocations, from sources of their choice at a price not higher than those negotiated in the government to government deals. Schon's refinery is expected to be first refinery to go into production in the private sector under the new liberal industrial policy of the Government. However, as engineering study by Messrs. Lummus Engineering Company is also underway for the setting up of six million tonnes refinery at Bin Qasim, as a Pakistan-Iran joint ventures. Foreign exchange for the import of crude by the private sector would be provided by the Government and the refiners would be free to market their products in domestic market. The proposed new refinery would also benefit from the new debt equity ratio of 80 per cent and 20 per cent under the new industrial policy contrary to the 70 and 30 per cent ratio for industrial projects.

Saindak Project Progress

The Chief Minister of Balochistan Mir Taj Jamali informed that this project worth 197 million dollars would be completed six months ahead of schedule of which would help save 40 million dollars to the national exchequer. The Managing Director Resource Development Corporation Yaqoob Bizanjo informed that the southern port of this project, would provide 30 tonnes of gold, 60 tonnes of silver, three lakh tonnes of copper, 19 lakh tonnes of iron and 43 lakh tonnes of silver over a 19-year period while the northern part is estimated to have deposits of gold, silver, copper, iron for 80 years. Area of this project is scattered over 13,000 acres and the work here would be completed by 1995.

Giving details about the work done so far Yaqoob Bizanjo said the construction of residential accommodation for 800 Chinese and 200 Pakistani engineers and workers was in full swing. He said that the requirement of electricity for the project was about 40 mw whereas 3.5 mw power house has been set up and two mw power station would be completed by the end of this month while 10 mw unit would be established by 1994 and till 1995 50 mw power supply station would be completed. He pointed out that the power requirements at project would be met by laying 37 km, long pipeline and the work is being awarded to Sui Southern Gas. Earth work on 37 km, long railway line has already been completed which connects with Taftan project area. He said that the 37 km long single road upto the project has been completed with the assistance of Government of Balochistan.

Alcatel Pakistan Ltd.

This industrial unit of 4,000 square meters would include a production centre and a software development centre, representing a total investment of roughly 200 million rupees. From mid-1994 this industrial unit would produce the Alcatel 1000 E 10 switching system, of which at least 120,000 lines would be manufactured per year by Pakistani employees trained in Alcatel technology. However, in order to meet the requirements of the Pakistani authorities on an immediate basis, Alcatel Pakistan Limited has already started production of the Alcatel 1000 E 10 system in temporary premises located near the future industrial unit in Islamabad. In January 1989 Alcatel signed a contract for 49,500 Alcatel 1000 E 10 lines in the Karachi region, raising the number of lines of this type in service or on order in Pakistan to 70,000 under an agreement. Alcatel Pakistan is a subsidiary of Alcatel CIT, from the Alcatel group, world's leading supplier of communications systems and cable. Its co-promoters are the Agha Khan Fund for Economic Development (AKFED) and one of the AKFED's affiliates in Pakistan Industrial Promotion Services (Pakistan). This is a part of agreement between Pakistan Telecommunication Corporation and Alcatel.

Pak-German Venture in Textile Processing

An ultra modern manufacturing unit of pigment pastes (Cramin) for textile printing and dyeing, under the joint venture of Bayer Ag Leverkusen (Germany) and Sandalbar Enterprise Private Limited, has started commercial production. The first phase of project has been completed with an estimated cost of Rs. 150 million and its production is 400 metric tons per annum. The unit has been set up on Sammundri Road, Faisalabad.

Power Plant

A 415 MW gas-fired power plant would be set up in Balochistan by an American firm Tenasak. This would be second power plant to be set up in Balochistan in private sector, the first being about 1300 MW Hub Power Plant by an international consortium with major share of Saudi Arabia. 10 more such power plants in the private sector with total generating capacity of about 200 MW are under government consideration. Both foreign and domestic investors have shown keen interest in establishing these power plants. American firm Intrag wants to set up 100 MW gas-fired power plant near Sahiwal and another 80 MW coal-fired power plant near Chakwal. Pakistani investors are also not lagging behind for commercial power plants. Habib Group is coming up for the installation of phase II of Jamshoro Power Plant in the private sector. Kohinoor Group is setting up 120 MW power plant near Lahore. All these private sector power plants would be based on almost same model agreement as applicable to Hub River Power Group. Meanwhile Fauji Foundation has also sponsored a big power plant in the public sector.

Hub Power Project

The ground-breaking ceremony of 1.8 billion dollar Hub River Power Project was performed by Federal Finance Minister Sartaj Aziz, on September 12, 1992. Apart from supply nearly 20 per cent additional power to the national grid, the 1292 mega watt power project has opened the way for several other projects in the private sector in the country and abroad.

Hub Power Company Limited will install oil fired steam power plant for generating 1292 MW of electricity costing U.S. dollars 1.80 billion. The lead sponsor of Hubco project is Xenel Industries Limited of Saudi Arabia. The finances have been arranged on the basis of Build-Own-Operate (BOO). The construction consortium comprises four companies Mitsui & Company Limited of Japan, Ansaldo GIE spa of Italy Ishikawajima Harima Heavy Industries Limited (IHI) and compagnie Bernard of France.

The project will be designed, constructed, owned and operated by the Hub Power Company Limited, incorporated in Pakistan. It will be located at the mouth of the Hub river in Balochistan and designed as a conventional oil fired power station. It will be constructed and implemented on the basis of a fixed price, jump-sum, date certain, turnkey contract undertaken by the consortium already named.

The Project will be financed on a limited recourse basis by a combination of on and offshore sources of equity and debt, drawn from the project participants, commercial investors and lenders, exports credit agencies and multilateral institutions. The debt: equity ratio will be approximately 80:20 based on total pre-finance capital costs.

The Hub Power Company Limited was incorporated in Islamabad on August 1, 1991 and Sheikh Mohammed A. Alireza was elected Chairman. HUBCO then proceeded to appoint as its statutary legal adviser the Karachi-based firm of Surridge & Beecheno and For Rhodes Robson Morrow, also of Karachi, as its auditors.

HUBCO has available to it, to support its international finance raising, the services of Morgan Grenfell and of Citibank, both based in London.

The project will provide jobs to around 3000 people in various works and after completion in 1996 about 400 persons be given jobs in different categories. Special care has been taken to avoid any environmental damage.

Financing

Hubco is the largest registered corporation in the country with an issued capital of about 300 million dollars. The sponsoring shareholders, such as Xenel Industries, Mitsui and Co., Ishikawasajima Harima Heavy Industries Co., British Electricity International and K&M Engineering and Consulting Corporation will subscribe quarter of the total issued capital.

A sum of 100 million dollars will be raised in the country. The ANZ Grindlays, with the recently privatised Muslim Commercial Bank and House of Prudential, will underwrite $800 million while a subscription of $20 million is being arranged by the National Development Finance Corporation.

The local equity, according to sponsors, will be offered to public in terms of convertible securities. The Pakistan investors will be given a fixed return on the securities throughout the construction period. These will be converted into Hubco shares after the commencement of commercial operation by the company.

About $125 million of equity will be raised by overseas floatation. Chartered West LB of London had underwritten the floatation.

A syndicate of foreign commercial banks, including Bank of Tokyo, Citibank Lyonnais and Sakura Bank, will arrange $360 million for the project. These loans will be underwritten by an Expanded Cofinancing Operation devised by the World Bank.

The Export Credit Agencies of Japan, Italy and France have guaranteed major source of financing to the tune of 300 million dollars.

The Mitsui & Co. will build the plant. Ansaldo of Italy will supply and install the turbines, feed heating plant, condensers, generators, electrical system. The Ishikawajima Harima of Japan, under the arrangements, will supply boilers and associated equipment. Campenon Bernard of France will carry out the civil work.

K&M Engineering and Consultant Corporation with Ebasco of USA will be the engineering consultant for supervising the design and construction of the project. British Electricity will operate and maintain this huge electricity generation complex for the first 12 years. Under the plan, the local manpower will also be trained by the British electricity.

The plant will consist of four boilers/turbine units, with each driving an alternator of 323 MW, WAPDA will be provided an electricity of 1,200 MW via two single circuit 500 kv 120 km long transmission lines from Jamshoro.

The fuel to the plant will be supplied from Port Qasim to the site via a 92 km-long pipeline. The plant will utilise 1.5 million tonnes of fuel.

Joint Venture in Gas

A Japanese organisation Idemitsu Oil Exploration Company will develop natural gas in Pakistan as a joint venture with British and Kuwaiti companies. These companies have already produced about two million cubic meter of natural gas a day last year in upper Sindh, 350 kilometres north of Karachi. It may be recalled that Idemitsu Oil and Kuwait Petroleum Corporation's subsidiary Kufpec (Pakistan) Limited each owns 30 per cent of the exploration rights in the area whereas Lasmo Oil (Pakistan) Limited owns about 35 per cent share.

Mian Mohd Sugar Mills

This is a dollar 20 million project to produce chemical from baggasse. The agreement was signed by a British company with Mian Mohammad Sugar Mills to annually produce 18,000 tonnes of butanol, acetone and butyl acetate. The raw material will be baggasse as one million tonnes is available in the country.

The British company TSA represented by an overseas Pakistani Tariq Imam will provide the plant, and technical know-how. Employing over 100 persone, the plant is expected to be commissioned in two years. As present the products are mostly imported from abroad. There will be saving of 1,000 dollars per tonne of three products. The company TSA specialises in using the indigenous raw material and has provided industrial plants to various countries including Pakistan.

Ring Spinning Frames Project

Hashwani Group of Companies has entered into a technical collaboration agreement with the leading Chinese No. 2. Shanghai Textile Machinery Works to manufacture textile ring spinning frames in Pakistan. The project, expected to cost Rs. 80 million, will start manufacturing this year. Under the agreement the Chinese partner will transfer technology and know-how and will arrange training of manpower while the entire expenses including the foreign exchange cost will be borne by the Pakistani company. It is said that 67.9 per cent of the installed capacity of spindles in the country come from Japan which costs 175 dollars per spindle. The price of Chinese spindle is 70 dollar but the Hashwani unit will try to supply the locally manufactured spindles at yet lesser rates.

The group plans to manufacture 100 ring spinning frames which is about 144,000 spindles per annum. This would be done under a steady deletion programme that envisions producing 80 per cent of the machinery locally by the end of the period. Hashwani manufacturing unit will practically be first of its kind in Pakistan in view of the sad experiments of SMC and TMC which were set up to manufacture ring spinning frames but resulted in collosal losses to the national exchequer and subsequent imports of billions of dollars worth textile machinery in the country.

Qaiser Brothers (Pvt) Ltd.

An agreement has been reached between Qaiser Brothers (Private) Limited of Karachi and Korea's Lucky Goldstar group of jointly set up a 20,000 tonnes/year dioctyl phthalate (DOP) plant in Punjab province. The 50-50 venture is expected to begin production in late 1992. DOP is a plasticiser used in the manufacture of PVC products such as sheets, films and cable. Pakistan currently imports its entire DOP requirement.

Hydrocracker Project

This project is being set up at an estimated cost of $350 million. About 250 acres of land has already been acquired for this purpose. The IDB will have an equity of 10 per cent. While the Crescent Petroleum Company has the larger equity of 35 per cent in the project followed by PERAC having an equity of 15 per cent. PSO 5 per cent and PBS 5 per cent. The rest will be from the public.

Din-Parekh Chemicals Limited

The company entered into a joint venture with Rohm of Germany to manufacture Oropon bate in Pakistan. Oropon is the first enzymatic bating agent invented by Rohm in 1907. At present Rohm's annual global sales are over DM3 billion and the company manufactures over 3,000 products. Pakistan will now be amongst 31 countries of the world with Rohm's manufacturing plant. The Pakistani company is also authorised to export to Afghanistan, Bangladesh and Iran. The company has achieved a unique position in the chemical industry by exporting Pakistan Chemicals to Taiwan.

Indus-Toyota Auto Plant

A joint venture between Indus Motors, and Toyota Tsusho Corporation of Japan, is expected to go into production by the end of next year or in early 1993 in Karachi. Construction work has started on the project to be set up over a 105 acre area at Port Qasim. On completion, the plant will produce 20,000 vehicles per year initially. The paintline, however, will have a capacity of 50,000 vehicles. The plant would produce different types of vehicles, including the 1300cc Toyota Corolla passenger car, a range of light commercial such as Toyota Hilux diesel pick-up and Hi-Ace 4x4 land cruiser.

The company will launch a new marketing concept in Pakistan with the introduction of these project, it would also promote dealerships which would provide sales, service and spares facilities under one roof. These would be exclusive Toyota dealers which will be fully equipped to provide services to their customers. Service personnel will be fully trained to ensure a high standard of performance. The company is expected to launch its dealership soon. There will be six dealers and distributors of Toyota products all over the country in the beginning.

Indus Motors will ensure a high quality of production state of the art technology and equivalent will be used to set up the production facilities with the help of Japanese experts. Under an agreement, the Toyota company will provide technology to make components locally. A department has also been formed to oversee the localisation of the components. It is hoped that the local production of components will increase from 20 per cent in the beginning to 50 per cent in the seventh year.

Coal-Fired Floating Power Project

German investors signed an agreement with Pakistani's private sector investors for establishing a 24 MW coal-fired floating power generating project in Balochistan. The agreement was signed by Dr. Wolfgang Bengel and Kari Bay for Germany MB Bagsi, M.D. Lieda for Lasbela Industrial Estate and Farooq Siddiqui for Pakistani private sector. Plant and machinery will be supplied by Germany's M Karl GmbH KG Company, who have supplied similar plants to China and some other countries. The power-generation plant will be based on low grade local coal, which will be used as its fuel. The Government of Balochistan has not only approved the project but issued the No Objection Certificate (NOC) in February, 1991.

The German investors for about 10 years will run the project through their expertise and will later hand over it to Pakistanis. Part of the funds will find its way through the World Bank as they have already pledged.

This will be a purely industrial project and will be the 'transfer of technology' in real sense, which was much needed in Pakistan. Project will generate employment initially to 60 people but later with the establishment of industries in Winder Industrial Estate it will provide jobs to about 5,000 people.

Rex Baren Batteries Ltd.

The company is located at 49th K.M. Multan Road Bhai Pairoo in District Kasur. The company is a joint venture with Jungfer Akkumulatoren GmbH of Austria. The plant and machinery has been imported for the production of lead acid automotive batteries and industrial battery cells. The company has started trial production from June 17, 1992. Foreign sponsors will be paid Austrian Schilling 1.4 million (Rs. 2.756 million) as technical fee.

The estimated cost of the project is Rs. 110.332 million including foreign exchange component of Rs. 55.188 million. The company offered share worth Rs. 11.400 million for subscription including share worth Rs. 2.280 million for NIT. The subscription was opened on October 12, 1992. The project was conceived by Lt. Gen. K.M. Azhar Khan (Retd). The issue was underwritten by Lt. Gen. K.M. Azhar (Retd) and Hajveri Holdings (Private) Limited.

a) Foreign sponsors will be paid Austrian Schilling 1.4 million (Rs. 2.756 million) as technical know how fee. This will also cover the expenses of their technicians and engineers working on the project in Pakistan. Of the total amount payable half i.e. Austrian Schilling 0.7 million (Rs. 1.378 million) has been paid when the machinery was installed while the balance will be paid on successful start of commercial production.

b) The company is liable to pay royalty for 5 (Five) years at the following rates if its products are sold under the licence and logo of BAREN BATTERIE AUSTRIA.

Batterie Austria:

i) 1% ex-factory price less Excise Duty, Sales Tax, if any, and trade discount on sales in the local market.

ii) 2% of F.O.B. price for exports. The Company has no intention to do so and therefore no royalty is proposed to be paid.

ICI Sodium Bicarbonate

ICI (Pakistan) has decided to make an investment of Rs. 135 million in Pakistan for setting-up a plant to manufacture 'sodium bicarbonate'. The plant will be located at the site of the 'soda ash' plant in Khewra. ICI's new plant going into production at the end of 1994, will save foreign exchange of Rs. 60 million annually. The capacity of the plant will be 10,000 tons per annum. 'Soda bicarbonate' is used extensively in industries like leather conditioning, molasses purification, textile dyeing/printing, pharmaceuticals, manufacture of rubber, beverage and baked product.

Honda Motor Co. Ltd.

Honda Motor Company Limited has agreed with the Shirazi family, a major shareholder in the Atlas Group, to set up a joint venture to assemble and sell automobiles in Pakistan, beginning in mid-1994.

The new company, named (Honda Atlas Cars (Pakistan) Limited capitalised at 400 million rupees and owned 51 per cent by Honda and 49 per cent by Pakistani investors, will start assembling Honda's Civic models with an annual 3,000 cars in the first year, rising to 6,000 cars in the future depending on demand.

The new company will create 300 local jobs. According to spokesman said the company will build a new plant in Lahore with a total investment of about 2.50 billion yen the Honda spokesman said. The Atlas Group, a major conglomerate has been Honda's motorcycle joint venture partner in Pakistan since 1964. The Pakistani government will provide incentives such as tax exemptions to import production facilities for the plant and an exemption on corporate tax for an initial period.

United Rubber (Pvt) Ltd.

A new auto tyre unit in the private sector is to be established at an estimated cost of US dollar 3.5 million at the Industrial Estate near Peshawar. The sponsor has already signed agreement with two Taiwan's firms for the import of plant and machinery along with technical assistance. The entire plant and machinery is scheduled to arrive in Pakistan before December 1991 and trial production will start from June. The proposed plant will have annual capacity of 120,000 tyres and 180,000 tubes. The plant besides providing employment to large number of workers will use imported natural/synthetic rubber and auxiliary as main raw material.

It may be mentioned here that the project is being financed by the Asian Development Bank by providing foreign exchange component to the tune of US dollars 1.37 million for financing the import of plant and machinery while rest of the financing has been arranged through local financial institutions in addition to equity investment from sponsors. Besides, Taiwan, the sponsor is also importing a part of integrated machinery of plant from the United Kingdom. The sponsor had already set up a retreating workshop in 1980 which has been in operation since 1981 for tyre retreading in sizes of 10, 12, 13, 16 and 20 inches rim.

Rupafil Limited

The International Finance Corporation, (IFC) will lend 14 million US dollars and provide 0.4 million US dollars in equity in Rupafil Limited to help finance the construction of an integrated polymer and polyester plant in Pakistan.

The USA based project sponsor, the Feerasta Group established since 1970, is interested in banking and is a leader in Pakistan's synthetic textile sector with interests in polyester filament yarn and staple fiber throughout Pakistan.

Project to commence production in 1993, Rupafil Limited will be located in the industrial area of Sheikhupura, a prime industrial location about 30 km from Lahore. The Rupafil project will be capable of producing a wide range of polyester filament texturized and flat yarn products in weights ranging from 50 denier to 150 denier. In Pakistan, this kind of polyester fabric is mainly used for ladies apparel.

The project aims to capture part of the growing Pakistan domestic demand for filament yarn currently met by import and to create direct employment for 350 people. IFC, the private sector arm of the World Bank Group, is the largest source of direct project financing for private sector ventures in developing countries and offers a wide range of financial, advisory and mobilisation services to its member countries. The corporation will take up 2 per cent of Rupafil Limited shares and a public offer of shares will take place after commercial start up of the facility.

Shell International

Shell International a world leader in oil, is back in Pakistan for oil exploration, following an agreement signed with LASMO Oil Pakistan which has 95 per cent interests in Block 36 in NWFP. Shell Exploration Pakistan will have 50 per cent shares of LASMO Pakistan, a subsidiary of British-based company and was granted licence for exploration in December 1990 for three years. OGDC has remaining five per cent interest. Shell stated that since signing the licence, over 599 kms of seismic data have been obtained on the block together with the geological information gathered from outcrop have led to the development of a prospect and drilling location. The well will be drilled in December 92 and the group are hopeful of success.
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Title Annotation:foreign investments in Pakistan
Publication:Economic Review
Article Type:Cover Story
Date:Nov 1, 1992
Words:5670
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