Investment in Pakistan

Attracting investment is a fiercely competitive activity amongst developing countries because the ongoing economic crisis has made this task more arduous. Countries around the globe have experienced significant reductions in the flow of Foreign Direct Investment in the last couple of years and, with no respite in sight, analysts and financial gurus predict tougher times ahead.
The shrinkage in FDI pool has led to an increase in competition amongst countries. Investment Promotion Agencies (IPAs) in various countries have geared themselves up to influence investment decisions by providing timely information and facilitatory services.
Pakistan's economy has shown a fair degree of resilience as evident from the fact that for the year 2010-11. Historically, Pakistan's performance in attracting investments has been impressive and FDI has emerged as a major source of private external flows. Liberalised investment regime and investment friendly policies have paid rich dividends. Pakistan was among a hand full of countries with a positive rate of growth and among the very few with the lowest decline in real GDP growth & FDI showed significant increase as compare to the counties of the region. It is also pertinent to mention that out of the overall foreign investment (portfolio, privatisation, and FDI); FDI has shown more resistance to global and regional economic shocks.
A land of many opportunities, Pakistan is a distinct blend of almost all economic sectors. Investors enjoy full security, safety and protection of their investments and are free to choose any activity where they feel they can earn a decent profit. A liberal foreign exchange regime allows foreign investors to bring in their capital without prior approval or authorisation and repatriate profits, remittances, dividends, royalties, fees for technical services and other legitimate payments overseas at their own convenience and discretion.
Pakistan is an agri-based economy with a well developed Agriculture Sector contributing 21.8 percent to the GDP and absorbing an overwhelming majority, 44 percent, of the country's labour force. The country has broad tracts of cultivable land that offer rich harvests and handsome returns to investors. Dairy and cattle farming, meat processing, and value addition ventures offer vast investment opportunities. Investment Policy allows 100 percent foreign equity in Corporate Agricultural Farming (CAF) and plant machinery are importable without duty.
Although the Manufacturing Sector has been hit hard by international and domestic factors (rising cost of doing business, demand compression in the export sector, difficult law and order situation), compounded by an acute energy shortage, the Government is alive to the fact that this sector contributes 18.5 percent of the GDP and that its vibrancy is of vital importance for Pakistan's economic success. With this consideration in mind, a policy for setting up Special Economic Zones has been approved envisaging development and operational management of the zones by the private sector with Government's facilitation and support. The incentives are Corporate Income Tax Holiday for a period of five (5) years. Existing initial depreciation / allowance of 50% shall be reconsidered to be enhanced to 100%. Federal Government / agencies will provide gas, electricity and other utilities at the Zero-point of the zones. Board of Investment will provide One Window facility to the investors. It is hoped that this initiative would provide the much needed impetus to Pakistan's Manufacturing Sector.
Over the years industrial and domestic demands for Energy and Oil & Gas have grown immensely. Since the whole economic wheel stands at the mercy of these two sectors, the Government is pursing fast track materialisation of investments in these sectors. Additionally, several structural reforms have been introduced to further liberalise the policies governing these sectors. Today we find a large number of foreign as well as local companies running successful businesses in Independent Power Projects (IPPs) and Oil & Gas exploration.
Services Sector has been the most important contributor to Pakistan's economic growth over the Services sector grew 4.6% in 2009-10. Reforms introduced by the Government have been influential in developing the Banking and Financial Sector of Pakistan. Pakistani banks are amongst the most profitable in the region. Recent acquisitions of local banks by multinationals are evidence of the lucrative opportunities that the Pakistani Banking Sector offers.
Deregulation and privatisation measures introduced in the Telecom Sector are the main reasons for the spectacular growth witnessed in this sector in recent years. Some positive externalities that have arisen from these measures are the acquisition of state owned Pakistan Telecommunications Company Limited (PTCL) by Etisilat of UAE and FDI by Wateen Telecom, Telenor, Warid and China Tel which have contributed significantly in developing Pakistan's telecommunication infrastructure and are responsible for providing employment to a large pool of local Pakistani talent.
The Public Private Partnership (PPP) Program in Pakistan has made substantial progress in the last few years. One of the milestones in the PPP history of Pakistan is the induction of the concept of Public-Private Sector Dialogue in the investment policy and strategy of the country. In its investment strategy 2010-15, the Board of Investment, is the apex body of the government of Pakistan to promote and facilitate investment in the country, would have five windows; the foremost is Public Private Sector Dialogue. Now the future investment policies of the Government would be drafted and reviewed through the initiation of Public private Dialogue.
Pakistan PPP policy covers, but is not limited to the following infrastructure sectors:
-- Transport and logistics including federal, provincial and municipal roads, rails, seaports, airports, fishing harbours as well as warehousing markets, slaughter houses and cold storages.
-- Mass Urban Public Transport, including integrated bus system as well as intra and inter city rail system.
-- Local Government Services including water supply and sanitation, solid waste management, low cost housing, and healthcare/education and skill development facilities.
-- Energy Projects, including hydroelectric and captive power generation units.
-- Tourism Projects, including cultural centers, entertainment and recreational facilities and other tourism related infrastructure.
-- Industrial Projects including industrial parks, special economic zones and related projects.
-- Irrigation Projects including those combined with power generation
-- Social infrastructure including education, culture and health infrastructure.
PPP investors are eligible to all the incentives available to the private investors. Some of these are:
-- All sectors except specified sectors of arms and ammunition, currency and mint. High explosives and radioactive substances are open even to foreign investors.
-- Full Legal protection to foreign investment through
1. Foreign Private Investment (Promotion and protection Act. 1976).
2. Promotion of Economic Reforms Act. 1992
Pakistan's Public Private Partnership has achieved significant milestones over the last few years. The journey ahead contains more initiatives and go-aheads. However, with a robust policy framework as well as a strong commitment and resolve, these initiatives will be implemented according to the need of the time. We assure that the Public Private Partnership Program will further strengthen the relation between Pakistan and Turkey in the coming years and become a success story.
The last three years with unrelenting economic instability have pushed all nations on the back foot. Foreign companies have started to pull out their overseas shareholding. However, Government's strategy to adopt stringent policy reforms has once again put Pakistan on the map of foreign investment companies. The Federal and Provincial Governments are working in tandem to develop policies to promote investments in all sectors of the economy. There is no doubt that Pakistan's economic transformation puts it on a firm footing to achieve higher levels of a business friendly environment. The country welcomes investors to join it on its journey towards economic progress.