PAIR INVESTMENT COMPANY LIMITED: Promoting development activities in Pakistan

Q: What is the rational behind the formation of PAIR Investment Company Limited? PAIR Investment Company Limited, formally called Pak Iran Joint Investment Co Ltd, is one of the series of specialised financial institutions, such as Pakistan Kuwait Investment Company, Pak Oman Investment Company Limited, Saudi Pak Industrial & Agricultural, Pak-Libya Holding Company etc, established as a joint venture between Pakistani government and a foreign country, to promote development activities in Pakistan and working relationship between Pakistan and the partner countries. The rationale behind formation is to bring the two economies together. PAIR came into being in 2007. I took this company as the Managing Director and CEO on 1st June 2011.
Q: What success can PAIR claim?
PAIR is in its infancy, with operating history of around four years. Initial years are usually difficult as one has to set-up the infrastructure. Since we are into long term financing, it takes three to seven years to get projects off the ground. At present, we have deployed our capital in the most useful manner, by investing in viable projects and the surplus in treasury bills.
PAIR has a capital of Rs 6 billion and around Rs 2.5 billion have been invested in different projects. A lot more can be done between Iran and Pakistan through this joint venture. Last year, around two weeks ago a very large delegation from Iran, comprising of around 45 people, had visited Pakistan. The delegation was headed by the foreign minister of Iran.
After four days of constructive discussion, a number of committees, related to banking and finance, power, media, railways, were formed. Moreover, these two countries signed three MOUs on power, media and PAIR Investments. They have showed strong support for this joint venture and are aiming to carry out all projects between Pakistan and Iran through this vehicle.
Q: When it comes to project financing, is it difficult to compete with commercial banks?Development financial Institutions have a limited business scope since their activities are concentrated in project financing. However, it is very competitive raising deposits as we are competing against commercial banks which are allowed to raise deposits in current and saving accounts, which the DFI's cannot. Therefore it is much easier for commercial banks to lead transactions due to their size and ability to deploy larger funds.
Q: Are you in compliance with MCR requirement? Absolutely, we are far ahead of the level required and have a lot of room to expand.
Q: What is your infection ratio?As most of funds are invested in treasury bills, nearly 80 percent of total funds, the quality of our assets is sound. However, our infection ratio is not more than 5 to 6 percent, compared to industry level of 15 to 16 percent.
Q: Don't you think that growing appetite for T-Bills will discourage investments in private sector?We are in a transition period. As project approval and deployment takes times, we usually put our idle cash in treasury bills.
From a development bank's perspective, investment in treasury securities is a negative sign because; our prime activity is to fund development projects. Hence, for a new company like us, where we can't lend all money in short period, investment in treasury funds sounds reasonable. We are aiming to raise our lending portfolio from Rs 2.5 billion to Rs 6.7 billion by June '2012 since we have good transactions in the pipeline.
Q: How can we induce Iranian investors to invest in Pakistan? That's our job. To attract investors, we have to showcase Pakistan. I am going to Tehran at the end of September for a board meeting and to meet some banks. We are also planning to arrange seminars in Tehran and subsequently in Pakistan to present good opportunities in the country.
We have to create awareness in the minds of Iranian about opportunities available in Pakistan, in power, fertiliser, textile segments etc. Profits returns are very good in Pakistan and we have relaxed policy on repatriation of profits. Iranians are interested in setting up a commercial bank in Pakistan as a joint venture between government of Pakistan and Iran. Secondly, they want to establish a fund in Pakistan from where Iranian government could invest in infrastructural development activities in Pakistan.
Q: But, given poor law and order situation, is it difficult to market Pakistan?No, they are very close to us and understand the difficulties we are going through and are very supportive.
Q: What is your take on Iran-Pakistan pipeline project?It is important to get this project off the ground since it will help industries in Pakistan to get an access to gas at very low cost. In short, there is dire need for us to turn this into reality to satisfy our needs. Since Iran has already completed work on their side, by setting up pipeline from Paras fields to Taftan, we just need to connect the pipeline from Pakistan side. Power is the need of the hour and we need to move swiftly to implement this project.
A number of countries have shown their interest to fund this project. Therefore, the ability of long term fund is available. This project will cost around $1.5 billion, but, the cost will increase if we connect this project to India, which will also assist Pakistan to earn a reasonable transaction fee.
Q: What is the scope and future of DFIs in Pakistan? As I have worked in many Pakistani organisations, my answer is same: there is a huge opportunity in this country. If you are risk averse, you can invest in treasury securities. But, if you have a vision and ability, huge opportunities are available in Pakistan. Even European investors, who are in Pakistan since the past many years, are still investing.
Q: Is there any thing you would like to add?This will be my first trip to Iran as a CEO of PAIR, where I will meet sponsors, which predominantly included "The Iran Foreign Investment Company". Since they are investing in many African, European and Asian countries, this will provide me an opportunity to showcase Pakistan in front of them. An Interview with Syed Ahmed Iqbal Ashraf Managing Director/CEO PAIR Investment Company Limited