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Trade And Investment Opportunities

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  • 1. Trade and Investment Opportunities in PAKISTAN
  • 2. Macro Policy Framework
    • Legislation - Legal Framework (1976 Foreign Private Investment Act and 1992 Protection of Economic Reforms Act).
    • Privatization - SoEs, banking and telecomm.
    • Liberalization - ‘withering away of the state.’
    • Financial Regulatory Bodies - SBP, SECP and MCA.
  • 3. Snapshot of the Economy
    • Growth (7%), inflation (9%) and unemployment (6.5%).
    • GDP (PPP) $427.3 billion (ExRt) $124 billion.
    • GDP Per Capita (PPP) $2600/-
    • GDP composition (services 52%, agri. 22% & manuf. 26%) and sectoral labor distribution (services 38%, agri. 44%, and manuf. 18%).
    • Growth sectors – agriculture (livestock, wheat, rice & cotton), manufacturing (textile/apparel, steel, chemical, fertilizer & cement), services (banking/finance, telecomm/IT, hospitality, warehousing/distribution, transport, medical & education).
  • 4. Investment Sectors
    • Telecomm.
    • Financial Services (Banking and Insurance).
    • Services (IT/BPO, Accounting, Legal, Medical, Education/VTT and Tourism).
    • Energy (IPPs, Hydel, Wind and Solar).
    • Construction/Housing/Engineering (DHAs).
    • Commercial Real Estate Development (UAE and Malaysia).
    • Infrastructure/logistics (RR, Roads, P&S, Airports and Storage/Warehousing).
    • Agro-tech/Corporate Agricultural Farming (Dairies/Livestock, Fisheries, Farming and Food/Fruit processing and Horticulture).
    • Manufacturing (Textiles and Apparel, Light Engineering, Pharmaceuticals, Medical, Sports and Leather garments).
    • Mining (Marble/Granite/Onyx).
  • 5. Pakistan’s Export & International Level Specialization in 11 out of 20 Globally Ranked ‘Most Market Dynamic Products’
    • Silk.
    • Knitted Garments.
    • Plastic Articles.
    • Leather Manufactures.
    • Non-alcoholic Beverages.
    • Medical Instruments.
    • Electrical Distribution Equipment.
    • Textile Undergarments.
    • Cereal Preparations.
    • Knitted Fabrics.
    • Pharmaceutical Products.
  • 6. Trade and Business Opportunities in Different Areas of Business
    • SMEDA (Pre-feasibility Studies).
    • BoI (Matrix and Sectors).
    • OPD (OPIC March 5-6, 2007).
    • Privatization Commission/Ministry.
  • 7. Trade Regulations
    • WTO commitments – Tariffs, Services and IPRs.
    • Tariff rationalization – 4 tariff slabs (5-10-15/20-25) based on value addition.
    • Trade Policy 2006 – inclusion of defense exports and services trade, FTAs (SAFTA), Domestic Commerce, TDAP, skill development, Carpet Cities, Dazzle Park & import of used machinery.
    • Import/Export Orders.
    • MoC (TP) www.commerce.gov.pk
    • IPOP (IPRs) www.ipo.gov.pk
    • CBR (Tax/Tariffs - SROs) www.cbr.gov.pk
  • 8. Legal Issues
    • BoI (Investment Policy) www.boi.gov.pk
    • SECP (Companies Ordinance and Stock/Capita Market) www.secp.gov.pk
    • SBP (Prudential Regulations and Policy Guidelines) www.sbp.gov.pk
    • Ministry of Finance (Macro economic policy and Budget) www.finance.gov.pk
  • 9. Investment Incentives
    • FDI protection.
    • Forex security.
    • Export/Import schemes.
    • SBP/SMEDA Financing.
    • Tariff reduction.
    • 100% repatriation.
    • 100% equity.
    • No performance (local content) requirements.
    • IT Parks.
    • Industrial Parks.
    • EPZs.
    • Tax (duty drawback and GST refund) and subsidy relief.
  • 10. International Confidence Indicators
    • FDI $3.02 billion (FY2005-06).
    • Portfolio Investment $12 billion.
    • Stock market capitalization $57 billion.
    • Islamic Sukuk $600 million and Eurobonds $1.4 billion.
    • Country rating (S&P): Positive – 'B+' foreign currency, 'BB' local currency long-term & 'B' short-term sovereign ratings .
  • 11. American Companies in Pakistan
  • 12. Cost of Doing Business - I
    • TI ratings/Corruption Perception Index (CPI score 142/163 in 2006; 144/158 in 2005; 129/145 in 2004).
    • HDI - 136/178.
    • IFC Doing Business Index – 74/175 (Starting a business of 50 employees involves 11 procedures and 25 days).
    • Competitiveness Index - 90/192.
    • Risk Rating - 66/100 (D).
    • Business Environment Ranking - 72/82.
    • WTO (TP Report) 2 TP reviews (1995 and 2002) passing marks and liberal policies.
  • 13. Cost of Doing Business - II
    • Direct labor cost $0.75/hour wage rate.
    • Electricity cost 1/5 of total costs ($0.09/Kw/hr).
    • Transportation/freight cost to USA: 24.8% air & 6.4% by sea (regional average is 12.5% & 3-4%).
    • Container Shipping Time: 25-35 days.
    • Inland Rail/Road Transport - $0.01-$0.02/km/ton.
    • Average landed tariff - 18.5% plus GST.
    • GST – zero rating vs. 15%.
    • Port Dwell Time – Exports 2 days/Imports 10 days.
    • Customs Clearance – PRAL and PACCS.
    • Red tape and speed money.
    • http://www.engineeringpakistan.com/CODB/CostofDoingBusiness.pdf
  • 14. Three steps of Investing Step 1
    • Obtain a NICOP/POC.
    • Contact Pakistan’s Trade Officer in your area.
    • Contact the Board of Investment (BoI) – the primary focal & coordination point for Overseas Pakistanis and foreign investors.
    • http:// www.pakboi.gov.pk /
    • http://www.pakboi.gov.pk/About_us/directory_of_boi_officials.html
    • Attaturk Avenue, G-5/1Islamabad, Pakistan,
    • Tel: 92-51-9219957, 9224101Fax: 92-51-9215554, 9206160
    • Hours: Monday to Thursday & Saturday - 0800 hrs to 1500 hrs Friday – 0800 hrs to 1200 hrs
    • Utilize the BoI’s Facilitation Center and Business Guide.
  • 15. Three steps of Investing Step 2
    • Contact SECP (Securities & Exchange Commission of Pakistan) – the main regulator of the capital markets and implementer of the Companies Ordinance (the grund norm governing businesses in the country).
    • http://www.secp.gov.pk/
    • SECP registers foreign and domestic companies in Pakistan.
    • http://www.secp.gov.pk/divisions/Portal_CLD/index_CSS.htm
    • http://www.secp.gov.pk/Guides/PromotersGuide.pdf
  • 16. Three steps of Investing Step 3
    • Visit the CBR, SBP, SMEDA and MoC websites to learn about the taxes/tariffs structure, credit policies, SME policy and latest Import and Export Orders governing trade.
    • Contact the US-Pakistan Business Council in Washington DC (http://www.uspakistan.org/) and the American Business Council of Pakistan in Karachi ( [email_address] ). The ABC is the largest group of single country investors in Pakistan.  It acts as a catalyst to promote US investment in the country.
    • Undertake a ‘look see’ visit to Pakistan to obtain a first hand view of the lay of the land.
    • Visit the Engineering Development Board and scrutinize their various studies.
    • Follow the proposed ‘investors checklist’.
  • 17. Investor's Checklist
    • Learning from others – contact US based expats already doing business in Pakistan.
    • ‘ Look see’ preparatory visit.
    • Feasibility study ( http:// www.pakboi.gov.pk/Misc/project_brief.html ; http://www.smeda.org.pk/pre-feasibility.php ).
    • Check the Engineering Development Board’s website for studies and useful information on many sectors of the economy ( http://www.engineeringpakistan.com/EngPak1/index.php ).
    • ABCP (American Business Council of Pakistan).
    • BoI/SMEDA/SECP interface.
    • RoI projection.
    • Due Diligence.
    • Local partner/risk sharing.
    • Local content/sourcing.
    • Hiring a legal consultant.
    • Checking land title transfer record.
    • Legal instrument drafting/risk transfer & mitigation issues.
    • Scrutinizing financing options- loan and equity issues.
    • Assessing Land-Capital-Management-Labor costs -- the ‘TFP equation’.
    • Perseverance and patience.
    • Consistency and constant follow up.
  • 18. GoP Paradigm
    • Education and skills development – HEC and NAVTEC.
    • Managerial development – bridging the ‘knowing-doing’ gap.
    • Free markets – trade liberalization and WTO commitments/FTAs.
    • Consumer protection – regulatory bodies.
    • Economic liberalization.
    • Transparent Privatization.
    • Regulatory oversight (SBP, SECP, PTA, NEPRA, OGRA, MCA, PEMRA, PPRA, HEC, PMDC, PEC & FAB).
    • Availability of credit – SBP, Banks and SMEDA.
    • Banking & insurance reform – SBP and SECP.
    • Stock market – foreign portfolio investment ($12 billion).
    • FDI – forex liberalization.
    • CBR overhaul – Customs and IT.
    • Trade Facilitation – reducing cost of doing business and National Trade/Transportation Corridor – Gateway to Central Asia.
    • Infrastructure development – roads, ports, railway and air transport.
  • 19. Useful Websites www.engineeringpakistan.com/EngPak1/index.php (Engineering Dev Board) www.pakistan.gov.pk (GoP Gateway) www.commerce.gov.pk (Trade/Commerce) www.pakboi.gov.pk (Investment) www.privatisation.gov.pk (Privatization) www.tdap.gov.pk (Trade-Export) www.sbp.org.pk (Finance and Regulation) www.smeda.org (SMEs) www.cbr.gov.pk (Tax/Tariffs) www.secp.gov.pk (Capital/Stock Market) [email_address] (American Business Council of Pakistan)
  • 20. United States Exports to Pakistan 2006
  • 21. Midwest Exports to Pakistan 2006
  • 22. Illinois Exports to Pakistan 2006
  • 23. United States Imports From Pakistan 2005
  • 24. All Import Commodities to Midwest from Pakistan 2005
  • 25. Top Ten U.S. States Exporting to Pakistan 2005