ARTICLE (December 25 2008): Saudi Arabia has shown keen interest in investing around half a billion dollars on floating liquefied natural gas (LNG) storage facility at Karachi for which a mother ship would transport 50,000 metric tons of LNG to Port Qasim. It is high time that security concerns are appropriately addressed and a corporate culture to build confidence of foreign investors is developed with a view to attracting more and more FDI.
This was stated by Waqar Ahmed Khan, Federal Minister for Investment, in a panel interview with Business Recorder at Islamabad. The panel comprised Raja Aqeel, Mushtaq Ghumman, Sohail Sarfraz and Fida Hussain.
THE FOLLOWING ARE EXCERPTS FROM THE INTERVIEW:
BUSINESS RECORDER: What has been the outcome of last month's visit of one hundred Pakistani investors to Saudi Arabia with the objective of attracting investment?
WAQAR AHMED KHAN: I was not the minister at that time, but I had an interesting meeting with the Ambassador of Saudi Arabia the other day. M/s Al-Tuwariqi Group of Saudi Arabia has initiated steel mill project at Port Qasim, Karachi in 2004 and $350 million has been invested in the first phase. They committed to spend another $700 million to enhance the capacity of the plant in the second and third phases.
They also showed interest in spending about half a billion dollars on floating LNG storage facility to bring gas from Saudi Arabia to Pakistan and indicated that all they have to do is to bring a mother ship to transport 50,000 metric tons of gas to Port Qasim as there is no facility there. The Petroleum Ministry, after my meeting, asked for the proposal and they are pursuing it.
BUSINESS RECORDER: What steps have been taken to meet the security concerns of foreign investors?
WAQAR AHMED KHAN: We are extremely conscious of security problems faced by the foreign investors. My interaction with multinationals shows that they do not dwell on the security issues but on what we are doing to ease their concerns. We have proposed establishing a task force to be headed by the Minister of State for Interior, in which the four provincial home secretaries, secretary investment, secretary interior and foreign secretary would also participate.
The idea is that the task force will set up 'response teams' who would co-ordinate meetings of foreign investors according to their requirements. This would entail making appointments and travel arrangements of foreign investors prior to their landing on Pakistani soil.
The second important concern of foreign investors was the current travel advisory for Pakistan and they are proposing life insurance cover during their stay in Pakistan as a means to deal with this.
There is also a need for continuation of investment policies. A proposal for this will be tabled in the cabinet as we believe investment policy and development projects must continue in the larger national interest. And transparency to facilitate foreign investors is also critical. We are working on resolving all these concerns.
BUSINESS RECORDER: Is there any progress on Bilateral Investment Treaty (BIT) with the US?
WAQAR AHMED KHAN: We are working on it in co-ordination with the Law Ministry. We have an independent council providing input on it. The US wants it under International Chamber of Commerce and Industry (ICCI) jurisdiction and we have no problem with that. But historically things don't go quite the way they should. So we are putting a clause that when the matter is subjudice in case of arbitration neither side should be able to exert political pressure till the matter is decided. In the last two years we have an evolutionary process in the judiciary but international process will be taken on board so that in case of arbitration our companies should be handled on the basis of equality.
BUSINESS RECORDER: Do you think arbitration with US will be successful?
WAQAR AHMED KHAN: In my talks with Senator Kerry I've asked for Free Trade Agreement (FTA) and we would like FTA to be signed within six months to a year. If FTA is not signed within this period then we will go for BIT. We have to look for our own interest to achieve greater access to US market.
BUSINESS RECORDER: Is there any progress on Reconstruction Opportunity Zones (ROZs) in FATA?
WAQAR AHMED KHAN: The (ROZs) will not be limited to FATA. Settled areas will also have such zones as many living in tribal areas have been displaced and have taken refuge in settled areas. They will receive training in these zones. The bill for the ROZs is lying with US Congress for approval.
BUSINESS RECORDER: Would you support Indian investment in Pakistan?
WAQAR AHMED KHAN: Right now there is status quo on this issue. I am not averse to Indian investment but investment depends on the relationship between the two countries.
BUSINESS RECORDER: Given the global financial crisis what is our position with respect to foreign investment inflow?
WAQAR AHMED KHAN: There is recession in the US and Europe. Recession has affected their banking sector and they are grappling with a return on investment which is negative. In contrast oil rich states and China are sitting on huge cash reserves.
The global meltdown has not affected Pakistan much - we are not a debt-based economy as we mostly deal in cash. The rate of return on investment here is over 30 percent. So we need to provide the right incentives to attract investment from oil rich countries and China.
BUSINESS RECORDER: Which sectors are identified as an investment priority?
WAQAR AHMED KHAN: Basically we need infrastructure projects. We have shortage of three to five thousands MWs electricity presently and will have 15,000 to 20,000 MWs shortage in the next 10 years; we need oil and gas exploration and need two, three dimensional off and on shore drilling. We also need investment in agriculture. We are an agro-based economy and yet we are not self-sufficient in majority of food products due to limited farm to market access.
We are the fifth largest milk producing country but 70 percent of our milk goes waste and right now there is tremendous need for investors from Gulf countries to enter the agro-based sector here. They will set up one milk pasteurisation plant for the time being but it will be replicated. Moreover, a local feed production plant with the assistance of Saudi government is being discussed which will triple milk production.
BUSINESS RECORDER: What measures have been taken to streamline expatriates remittances sent through Hawala/Hundi?
WAQAR AHMED KHAN: I believe that the same incentives must be given to our expatriates as given to foreign investors.
BUSINESS RECORDER: Is there any variation in tax holiday depending on the location of the project?
WAQAR AHMED KHAN: There is no variation on geographical basis. We want to develop a corporate image of Pakistan, tell the world that we are ready to do business.
BUSINESS RECORDER: What steps have been taken to remove hurdles identified in the perception survey of Overseas Investors' Chamber of Commerce and Industry?
WAQAR AHMED KHAN: To overcome hurdles every sector of the economy will interact with BOI. Concept of e-government will be introduced vigorously to make management efficient. MoUs for the projects will be signed only after fulfilling all the requirements.
In the past, a lot of MoUs were signed but not implemented in the absence of feasibility studies, financial analysis, etc. What we are trying to do is that before signing MOUs we will prepare a list of say five prioritised projects from each ministry with complete information, documentation and feasibility studies conducted by our experts. For these projects the source of raw material, local or imported, will also be identified and its impact on our GDP assessed. Priority will be given to value-added exports.
BUSINESS RECORDER: What is the progress on seventy-one projects worth $60billion presented to Friends of Pakistan in Dubai?
WAQAR AHMED KHAN: These were identified prior to my joining the ministry, but they are packaged very well. To streamline the working of this Ministry we will set up a data bank and anyone will be able to access information on specific areas where investment opportunities exist in abundance. With data bank in place one would be able to access information on investment opportunities in his sector of interest where ever he is sitting ie in Washington, Cairo or in Indonesia.
BUSINESS RECORDER: Do you envisage a role for our missions abroad?
WAQAR AHMED KHAN: We are communicating with all of our missions, we have asked them to provide information on all probable foreign investors and we have asked the Planning Commission and all the relevant ministries to give us a list of all the prioritised projects.
BUSINESS RECORDER: How much foreign investment has Pakistan received during this year?
WAQAR AHMED KHAN: About $6 billion this year and we are expecting about $10 billion in the next calendar year.
BUSINESS RECORDER: Is the government doing something to bring back politicians' money banked abroad, estimated roughly at 30 percent of investment in the country?
WAQAR AHMED KHAN: It is more than 30 percent, but we are trying to encourage everyone to invest in the country whether he is a politician or expatriate with business interests abroad. They all should bring back their money to help the country develop the economy on sound footing.
BUSINESS RECORDER: Is one window facility for investors being implemented?
WAQAR AHMED KHAN: The question is no longer of allowing one-window operation. We are at a juncture when we need to re-evaluate our position and our stance. We can't make any further mistakes on how to move forward. We are in a situation where we really want to progress and we must move forward in tandem be it politicians, civil or military bureaucracy.
BUSINESS RECORDER: What is your vision with respect to attracting investment?
WAQAR AHMED KHAN: We must build a corporate image of Pakistan with the support of all the sectors of the economy. IMF package has given credibility to our economic policies. It has been a perception builder. We are now working on our investment policy diligently. A ten-year investment policy is in the offing. We must come out with a transparent mechanism of corporate governance.
BUSINESS RECORDER: Is the government going to revisit the agreement with Singapore Port Authority?
WAQAR AHMED KHAN: We will ensure that no changes are made in the original agreement and it will be followed in letter and spirit. I think the continuation of policy is of utmost importance.
BUSINESS RECORDER: Will PPIB merge with BOI?
WAQAR AHMED KHAN: The government is considering this, but there is nothing concrete as yet.
