It is a good news that the Sultan of Brunei has welcomed Finance Minister Shaukat Aziz's proposal that a joint investment company be established in Pakistan with capital investment from both the sides, and the matter is to be discussed by the officials of the two countries.
The pattern of the proposed investment company would be similar to that of others already operating in Pakistan in collaboration with Libya, Kuwait, Saudi Arabia and Oman.
This proposal, when implemented, would open the way for capital inflows from Brunei in the form of long term loan financing for industrial and other projects which may be set up by private investors in the country.
Such joint investment companies are described as development finance institutions (DFIs).
The capital structure of these institutions is based on contributions in foreign exchange by the Islamic countries mentioned above to the extent of 50 percent, while the remaining 50 percent is subscribed by the Government of Pakistan in local currency.
Additionally, the oil-rich Muslim countries with stake in these institutions also provide lines of credit in foreign exchange from time to time for financing viable projects of economic importance in the private sector.
It may be recalled here that Pak-Oman Investment Company was established about a year ago. A new joint investment company with capital support from Brunei will be a promising addition to the financial sector in Pakistan.
While discussing the proposal with the Sultan of Brunei on the eve of his departure on Thursday at the conclusion of his three-day state visit to Pakistan, Shaukat Aziz also hinted at the possibility of Brunei's capital investment in Pakistan in financial services, tourism and other viable avenues.
The establishment of joint investment company would initiate the participation of Brunei in the development of Pakistan's financial services.
This institution may further be supplemented through establishment of a lease finance company for financing projects and consumer durable.
The operations of Pak-Libya Investment Company, Pak-Kuwait Investment Company, Saudi-Pak Investment and Industrial Company and Pak-Oman Investment Company in Pakistan have significantly filled the gap created by the DFIs virtually ceasing long term loan financing in foreign exchange due to discontinuation of lines of credit from the World Bank to them.
Thus the alternative source of foreign exchange inflows through the joint investment companies has proved to be a well sustained institutional arrangement for project financing in Pakistan.
The acceptance of the Finance Minister's proposal by the Sultan of Brunei turned out to be a positive outcome of his visit to Pakistan.
The joint statement issued at the end of the Sultan's visit emphasised the need for closer co-operation between the two countries in economic activity besides co-operation in the fields of defence, combating international terrorism and co-operation in fighting against other crimes on a global basis.
It was also decided that the Joint Economic Commission proposed to be created would have the status of a Joint Ministerial Commission.
Brunei Darus-salam is an oil rich country with offshore production of oil and gas. Its per capita income is estimated at $17,500 which may be due to a smaller population and high level of oil income.
It was formerly known as North Borneo Sarawak which was a British protectorate since 1888 and was given independence in 1984.
The country depends on imports for food items and its agriculture is in an undeveloped state.
Pakistan can export rice and other food items. At the same time Pakistan's assistance may also be offered for development of agriculture, entailing manpower export also while investment flows from Brunei may be usefully employed in Pakistan by promoting joint venture projects.
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