The Financial Times of June 1, 2005, has published a Special Report on the investment friendly atmosphere in Pakistan. The report, entitled "Investing in Pakistan" terms Pakistan as "arguably one of the four to five most dynamic economies in Asia." While the report can be accessed by FT subscribers by going to http://news.ft.com/cms/a5c6affe-c936-11d9-b9f4-00000e2511c8.html Some extracts are given below: Results arriving at military quickstep Democracy has yet to return but an improved economic performance is encouraging investors, writes Jo Johnson. Gen Musharraf might not be an economist of the stature of India’s prime minister, but his pragmatic and determined approach to reform is delivering results at a pace of which Dr Singh must only dream. The before and after snapshots of the Musharraf era present a compelling picture for investors… Outpacing arch-rival India, Pakistan is arguably one of the four to five most dynamic economies in Asia. With a fiscal deficit of 2.4 per cent of GDP, against 6 per cent in 1999, Pakistan no longer lives delinquently beyond its means. Public debt, interest on which ate up 85 per cent of revenues five years ago, is down to 68 per cent of GDP. Thanks to a massive increase in foreign remittances since September 11, 2001, Pakistan is running a current account surplus of 1.4 per cent of GDP, compared with a deficit of more than 7 per cent in the mid-1990s. Foreign exchange reserves have risen almost 10-fold since 1999 and now comfortably cover nine months of imports. Fast growing trade and foreign direct investment (FDI) testify to its rapid integration with the international economy. FDI will pass the $1bn mark this year, three times its level at the start of the decade. Exports this year of around $14bn have doubled since 1999. Privatisations too are proceeding apace. “Pakistan is now more credible in the world than ever before,” says Prime Minister Mr Shaukat Aziz, on his return from a trade promotion trip around South-East Asia. PRIVATISATION High summer for sales programme The turnaround in Pakistan’s economic fortunes has strengthened investors’ appetites, writes Farhan Bokhari. Pakistan’s privatisation commission has begun the most ambitious period in its history, with the decision to seek bids this summer for the privatisation of Pakistan Telecommunication Company (PTCL), the state owned telecom monopoly, Pakistan State Oil, the main oil marketing company and National Refinery, the main oil refining complex. The sale of these three companies alone could fetch more than Rps120bn ($2bn), a record for Pakistan, according to estimates by privatisation ministry officials. It underlines the accelerating pace of the country’s privatisation programme, which began 15 years ago. During the first 10 years of the programme, Pakistan raised Rps60bn. But in the past five years, it has earned Rps111bn or more than three times the annual average from the 1990s… Abdul Hafeez Shaikh, Minister for Privatisation, says the UBL case demonstrates another opportunity for small investors to reap windfall gains from an expected rise in share prices following the IPO, and highlights the bank’s improving finances. In the past year UBL has for the first time paid a dividend - of 22.5 per cent of after-tax profits - having never offered one in almost 30 years in the public sector. The sale of UBL shares is expected to take the number of shareholders in the stock market to more than 1m for the first time, from just 70,000 three years ago, adds Mr Shaikh. Previous IPOs from other public sector companies such as Pakistan Petroleum, Oil and Gas Development Company, Sui Southern Gas, National Bank of Pakistan and now UBL, all strengthen the “privatisation for the people concept”, he says. Western economists acknowledge that the privatisation programme has built up momentum to the point where key policymakers such as Mr Shaikh are confident of prospects. “Privatisation in Pakistan has now really begun happening after a gradual build up of momentum over time. The government is eager to look in to all sorts of privatisation possibilities for the future,” says one western economist in Islamabad… RELATIONS WITH INDIA Peace hopes bring trade dividend Resolution of the Kashmir dispute would benefit both countries, writes Jo Johnson Over the last five years Pakistan has started to throw off the dismal export record it acquired during the lost decade of the 1990s. Whereas exports grew during the 1970s and 1980s at an annual average rate of 18.6 per cent and 8.5 per cent respectively, they increased by an average annual rate of just 4.5 per cent during the 1990s. At a time when other Asian countries were turning into tigers by doubling their exports every five years, Pakistan’s share of global trade fell from 0.34 per cent in 1970 to 0.21 per cent in 1980 and to 0.15 per cent in 2000… This decline is now being reversed. Pakistan's exports, which are expected to grow by 15% in the year ending in June, have doubled in value over the last five years to $14bn. With imports rising to $18bn this year, boosted by the rising demend for machinery and higher oil prices, Gen Musharraf wants to build on this performance. Mr Shah, who is formally the finance adviser to Shaukat Aziz, the prime minister, says the government is now targeting a 25 to 30 per cent annual growth in exports. “We need to be doubling our exports in three years and want exports alone to account for 30 per cent of GDP,” he says, noting that exports and imports combined now account for 25 per cent of GDP. GEOPOLITICS OF ENERGY Three routes to meet rising demand for gas Pipeline decision is in the offing, writes Victoria Burnett With economic growth projected at about 7 per cent a year, Pakistan expects demand for gas to rise from 3.8bn cu ft per day now - covered by domestic supply - to 8bn cu ft by 2020. Failing a big gas find, demand would outstrip domestic supply by 2010. Ahmad Waqar, secretary for petroleum, says alternative energy sources such as furnace oil are twice as expensive. Gas accounts for about half of Pakistan’s energy, with 30 per cent coming from oil and 20 per cent from coal, hydroelectricity and nuclear power. Pakistani officials and independent analysts say a pipeline that would carry gas from Iran to India, via Pakistan - estimated to cost about $4.5bn - is the most logistically viable of three possible projects. INFORMATION TECHNOLOGY INDUSTRY Minnow plans to become big fish Investor interest is rising in the small but fast-growing sector, says Khozem Merchant Resource, Pakistan’s largest call centre group, which is listed on the Karachi stock exchange, has acquired 13 overseas call centres with another six in the pipeline this year. Sales of $170m make Resource comparable with the biggest call centre businesses in India. Resource’s strategy contrasts with the historic approach in India, where call centres are only now turning to acquisitions to add skills that will earn higher margins than traditional commoditised voice services. The latter dominate Pakistan’s sector… Exports, rising by one-third annually, account for one-fifth of Pakistan’s IT earnings, compared with two-thirds in India. There are signs that the yawning disparity may narrow. In May S Ramadorai, chief executive, and other senior officials from Tata Consultancy Services, India’s largest IT company, flew to Lahore, Karachi and Islamabad, where they held talks with local business and political leaders about setting up a software centre. Earlier, a unit of South Korean business group Hyundai opened up a software centre in Karachi, employing 60 local developers to work on an installation at the central bank. “These visits show a higher level of interest from foreign investors, which is helping to break the 9/11 perception that has held us back,” says Jehan Ara, president of the Pakistan Software Houses Association, an industry body modelled on its Indian counterpart, Nasscom. Co-operation between the two lobby bodies is rising, particularly at regional forums.
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