Q The Board of Investment (BOI) has been revamped in recent years. What is its new role?
A When President Pervez Musharraf assumed power in 1999 the economy was in very bad shape and there was a lack of political continuity. The new message was clearly that the government has no business running business and therefore the thrust was firmly on deregulation, liberalisation and privatisation.
The BOI’s previous role was confined to foreign investment but, with the legislative and structural changes that took place in 2001, we were given responsibility for domestic investment as well. The focus has been on these investors because once satisfied, they become our best marketers. Another target is the existing multinationals operating in Pakistan and, third, overseas Pakistanis. That, in a nutshell, is the BOI’s expanded brief.
Q What sectors are you targeting for investment?
A Priority has been given to five sectors. Oil and gas ranks high, along with power generation, IT and telecommunications, agriculture and the development of small and medium enterprises. Infrastructure development is for us part and parcel of power generation, including roads, dams and other areas.
The government has put together task forces from the private sector, in which leading businessmen decide on the appropriate policies for each of these areas. For instance, the local chairman of ICI was given the task of devising a policy for investment needs in the chemical industry, and so on. About 60% to 70% of those policies were implemented in the space of three years, including the rationalisation of tariffs, duty reduction on raw materials, plant machinery and semi-finished goods. Corporate taxes have also been cut.
Q There is a perception that Pakistan is a risky place for investment. What can you say about this negative image?
A What I can say is that in all these years, even before General Musharraf came to power, no foreign interests have ever suffered and no businessmen have been the victims of attack. Even during the nationalisation that took place in 1973, not a single foreign company was touched.
Terrorism is a global phenomenon and Pakistan suffers just like many other countries. But we have taken stringent steps to combat terrorist activity. Through better intelligence and vigilance, we have been able to round up about 600 Al Qaeda militants since 9/11, and this is an ongoing process.
I think that the way Pakistan is being labelled as one of the most terrorist-prone countries is totally misleading. Look at the bombs going off in France, Egypt and Turkey, for instance. Investors are looking for good returns, security and continuity. For the past five years, there have been no policy changes and we see a positive improvement in investor confidence, particularly in the domestic sector, where more than $4bn has been poured into the textile industry, to name but one sector.
Q Do you see any signs of returning confidence from foreign investors?
A With regard to FDI, in the fiscal year 2000-01 we received only $322m. But this grew to $485m in the following year and in 2003-04 it was a record $950m. This has to be seen as a reflection of renewed confidence in Pakistan.
We have major foreign investments coming in to oil and gas, power, telecommunications and engineering. The government has received 35 expressions of interest for power projects to add 7800 megawatts of power to the national grid, of which seven have already issued letters of intent.
Through our reforms and initiatives, key large industries that were working at about 60% of capacity are now running at 95% or more. Seven new cement plants are on the drawing board, automobile assembly is in need of investment and we need to expand our power generation system.
Q How badly was foreign investment hit by the September 11 terrorist attacks and travel advisories issued by major investor countries like the US and Britain?
A People were not prepared to come to Pakistan. From January 2003, when the South Atlantic Regional Conference was held, India and Pakistan began mending their fences and Afghanistan started to quieten down, the indicators have turned more positive. More than 100 foreign trade and investment delegations from 25 countries have visited Pakistan in the past year.
We now have more than 500 foreign companies operating here, of which about 300 are major multinationals, and there is no doubt that the market is there. We can also offer a strategic location next door to the central Asian republics and India.
Q How important is foreign investment to Pakistan’s economic development?
A There is no question that this is a key element to help us achieve our economic growth and development targets. In the past 14 years, FDI receipts have amounted to around $8bn. We have analysed which countries this has come from, and the outcome is that 60% comes from the US and Britain. Then we examined the situation on a sectoral basis and found that independent power projects ranked high on the list, along with the financial services sector.
Considering our priorities, we are hungry for modern technology which, coupled with FDI, is a great bonus for us. We have targeted some 15 countries in key geographical regions to tap for state-of-the-art technology. These are in North America, Europe and the Middle East and Asia, and the main focus is there. In these countries, we are working with well-placed overseas Pakistanis with top managerial and technical skills. We have appointed many of these people honorary investment counsellors, whose role is to market Pakistan to foreign investors. Their job is to get out the message that in our part of the world, Pakistan has one of the best investment regimes available. All sectors are open to foreign investors without restriction and we have created a level playing field, and this refers to financial incentives as well.
Q What is your outlook for FDI this year?
A I am confident that we can attract more than $1bn in investment from overseas. Our appetite is unlimited and the signs are good, as people have started to visit the country and hold international meetings here for their parent companies. The situation will not be turned around overnight but the signals are positive.