The Financial Times of June 1, 2005, has published by SonnyWoodcock


									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

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

“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.


High summer for sales programme

The turnaround in Pakistan’s economic fortunes has strengthened investors’ appetites, writes Farhan

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…


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.


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.


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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