Pakistan privatisation investmen_policies_v3_28112006
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Pakistan has pursued privatization and liberal investment policies to encourage private sector growth. The government's role is now focused on policymaking, regulation, and infrastructure while private businesses take the lead. Pakistan has had considerable success with its privatization program, raising over $6.3 billion, and sees further opportunities in upcoming privatizations. Foreign investment in Pakistan has increased significantly in sectors such as communications, financial services, and energy. Major investors include the UAE, US, and Saudi Arabia.
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Pakistan privatisation investmen_policies_v3_28112006
- 1. 1 0 Pakistan’s Privatisation and Investment Policies November 2006
- 2. 18 Privatisation Policy – The Government’s Role should be confined to: – Making Policy and providing good governance – Providing a sound and effective regulatory framework, to ensure social equity and economic justice – Providing an enabling environment, including physical and technical infrastructure and social services – Privatisation Policy to encourage and promote private sector as “engine of growth” to increase investment and introduce new technology, improve management and increase productivity – To ensure better quality, lower cost and higher profits and increased dividends and tax revenues “The Government has no Business to do Business”
- 3. 19 Privatisation Programme Has Been the Cornerstone of Pakistan’s Reform Process – Most successful privatisation agenda in the whole of the sub continent – From 1999, to date over US$6.3bn has been realized Privatisation transactions Privatisations Have Gained Significant Momentum in Recent Years… Source: Privatisation Commission 316 57 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 From1991- 1999 From 1999-Aug 2006 PKRbn (US$ 5.3 bn) (US$ 0.9 bn) 320 102 Transactions 58 Transactions • Power Company • 4 Banks • 11 Cement Factories • 7 Engineering Units • 7 automobile and tractor plants • 11 Chemical Industries • 19 vegetable oil and 15 Roti/Bread plants •Flagship Telecom Company •3 Banks •Karachi Port Utility •Major Oil Refinery •3 Fertilizer Co.s •4 Cement factories •6 Oil & Gas Fields
- 4. 20 Broad Based Privatisation Programme Financial Institutions – United Bank – Habib Bank – National Bank – ICP – Strategic Sale and IPO – Strategic Sale – IPO and Secondary Offering – Sale of management rights Telecommunication – Pakistan Telecommunication Co – Strategic Sale Oil & Gas – Working interest in 9 fields – National Refinery – Oil & Gas Development Co – Pakistan Petroleum – Sui Southern Gas Co – Strategic Sale – Strategic Sale – IPO – IPO – Secondary Offering Power – Karachi Electric Supply Corp – Kot Addu Power Co – Strategic Sale – IPO Fertilizer – Pak Saudi Fertilizer – Pak Arab Fertilizer – Pak American Fertilizer – Strategic Sale – Strategic Sale – Strategic Sale Key Recent Privatisations To date the current government has realised over US$5.3bn
- 5. 21 Strong Privatisation Pipeline – Upcoming Privatisations Sector Company Name Status Total Assets US $ MM Net Profit US $ MM Oil & Gas – Oil & Gas Development Co – Pakistan Petroleum – Pakistan State Oil – Sui Northern Gas Pipelines – Sui Southern Gas Co – PARCO – Secondary / GDR offering; Strategic Sale – Strategic Sale – Strategic Sale – Strategic Sale – Strategic Sale – Strategic Sale 1,909.61 529.81 1,169.52 1,084.61 628.01 N/A3 549.51 143.71 125.42 45.91 16.91 N/A3 Financial Institutions – National Investment Trust – Habib Bank – State Life Insurance – United Bank – SME Bank – Sale of management rights – IPO (10%) – IPO (10%) – IPO (up to 10%) – Strategic Sale N/A3 8,814.91 2,200.31 5,784.11 N/A3 N/A3 160.781 2.21 99.11 N/A3 Power – Jamshoro Power Co – Faisalabad Electric Supply Co – Peshawar Electric Supply Co – Kot Addu Power Co – Strategic Sale – Strategic Sale – Strategic Sale – Secondary Offering N/A3 464.31 N/A3 612.21 N/A3 31.861 N/A3 134.11 Fertilizer & Chemical – Lyallpur Chemicals & Fertilizers – Hazara Phosphate – Strategic Sale – Strategic Sale N/A3 N/A3 N/A3 N/A3 Engineering – Heavy Mechanical Complex – HEC – PMPS – Pakistan Steel – Strategic Sale – Strategic Sale – Strategic Sale – Sale of management rights N/A3 N/A3 N/A3 598.71 N/A3 N/A3 N/A3 2.31 Minerals Tourism/ Restaurants – Salt mines – Coal mines – Pakistan Tourism Motels – Strategic Sale – Strategic Sale – Sale N/A3 N/A3 N/A3 N/A3 N/A3 N/A3 Source: Annual Reports 1. End of FY05 All figures converted at the rate of US $ 1 = PKR 60 2. End of FY06 3. N/A – Not Applicable or Unlisted Companies
- 6. 22 Investment Policy & Opportunities
- 7. 23 Liberal Investment Policy Equal treatment of local & foreign investors All economic sectors open to foreign investors Foreign equity upto 100% allowed No Government permissions required Attractive incentives package Remittance of capital, profits, royalty, technical & franchise fee allowed Network of Export Processing Zones / Industrial Estates Import of raw material for export manufacturing zero-rated Bilateral Agreements : Investment Protection 47 Countries Avoidance of Double Taxation 52 Countries 7
- 8. 24 Legal Protection To Investments – Foreign Private Investment (Promotion & Protection) Act, 1976 – Protection of Economic Reforms Act, 1992 Salient Features – Equal treatment of local & foreign investors – Protection of agreements – Full repatriation facilities – Remittance by foreign employees allowed – Fiscal incentives for investment shall continue for the term – Specified & shall not be altered to the disadvantage of investors
- 9. 25 Attractive Regulatory Environment - Liberalization Accelerating Investment Activity – Liberalization and privatisation have played a key role in increasing investment activity – Investment as a % of GDP rose to 18% in FY06 – FDI as a % of GDP rose to 2.7% In FY06 Source: SBP Website – Net Inflow Of Foreign Private Investment (Jul-June 2006) The FDI numbers include privatization proceeds but not portfolio flows Total Foreign Direct Investment 322 368 680 750 1,161 1,981 363 1,540 470 117 118 199 0 500 1000 1500 2000 2500 3000 3500 4000 FY00 FY01 FY02 FY03 FY04 FY05 FY06 US$Mn Greenfield Investment Privatization Proceeds 470 322 485 798 949 1,524 3,521 Total Foreign Direct Investment
- 10. 26 Source Million $ Leading Sectors Million $ U.A.E. 2,067.8 Communication 2,714.2 USA 1,619.0 Financial Business 1051.8 Saudi Arabia 348.2 Oil & Gas & Petro Ref 1163.9 Norway 431.0 Power 448.6 UK 739.8 Trade 279.0 Others 2,071.2 Others 1,619.5 Total 7,277.0 Total 7,277.0 16 Total Foreign Investment Inflows (2001-06) Source : SBP Website – Net Inflow Of Foreign Private Investment (2001-2006); Total Foreign Investment Flows = Foreign Direct Investment + Portfolio Flows
- 11. 27 Top Investing Countries (2001-06) –Current, Value in Million US$, Percentage Others, 2071, 29% UAE, 2067, 28% USA, 1619, 22% UK, 739, 10% Norway, 431, 6% Saudi Arabia, 348, 5%
- 12. 28 Leading Sectors (2001-06) –Current, Value in Million US$, Percentage Communications (IT & Telecom), 2714, 38% Oil & Gas (Exploration), 1163, 16% Financial Business, 1051, 14% Power, 448.6, 6% Trade, 279, 4% Chemical, 226, 3% Other, 1393, 19%
- 13. 29 Source Million $ Leading Sectors Million $ U.A.E. 1,424.5 Communication 1,937.7 USA 516.7 Financial Business 329.2 Saudi Arabia 277.8 Oil & Gas & Petro Ref 312.7 Norway 252.6 Power 320.6 UK 244 Trade 118.0 Others 805.4 Others 502.8 Total 3,521.0 Total 3,521.0 16 Total Foreign Investment Inflows (2005-06) Source : SBP Website – Net Inflow Of Foreign Private Investment (Jul-June 2006); Total Foreign Investment Flows = Foreign Direct Investment + Portfolio Flows
- 14. 30 Top Investing Countries (2005-06) –Current, Value in Million US$, Percentage Others, 635, 18% UAE, 1424, 40% USA, 517, 15% UK, 244, 7% Norway, 252, 7% Saudi Arabia, 277, 8% Switzerland, 171, 5%
- 15. 31 Leading Sectors (2005-06) –Current, Value in Million US$, Percentage Communications (IT & Telecom), 1937, 43% Oil & Gas (Exploration), 313, 7% Financial Business, 392, 9% Power, 320, 7% Other, 1393, 31% Trade, 118, 3%
- 16. 32 Investment Highlights: Compelling Economic Proposition • Rising disposable income • Growing population • Compelling size of middle class • Asset values rising • Rising remittances Accelerating ConsumerismAccelerating Consumerism • Low cost raw materials & manpower • Educated work force • Pro investment policies • Improving infrastructure • Entrepreneur culture • Stable exchange rate • Comparable advantage • Favorable geographical location • Corporates globalizing • Low tariff regime Growing Trade IntensityGrowing Trade Intensity Surging Domestic &Surging Domestic & Foreign InvestmentForeign Investment
- 17. 34 # # # # # ## ### ## # # # # # # # # # # # # # # # # # # # Yazd Kabul Delhi Patna Herat Kashi Urumqi Almaty Lahore Jaipur Kanpur Nagpur Frunze Masqat Mashhad Lucknow Benares Zahedan Karachi Amritsar Calcutta Dushanfe Qandahar Toshkent Abu Zaby Samarkand Ashkhabad Islamabad New Delhi Kathmandu Hyderabad Ahmadabad Rawalpindi Faisalabad China India Iran Kazakhstan Pakistan Afghanistan Oman Uzbekistan Turkmenistan Nepal Kyrgyzstan Tajikistan United Arab Emirates Jummu & Kashmir (Disputed Territory) At The Center of Asian Growth Booming East Asia Capital & energy surplus Middle East Pakistan becoming Asia’s trade, energy and transport corridor Pakistan Land locked energy rich Central Asia
- 18. 35 Oil & Gas Priority Sectors • Offshore & onshore exploration • Refining • Pipelines • Storages • Offshore & onshore exploration • Refining • Pipelines • Storages • Call centers • Cell phone • E-Commerce • Software • IT Parks • Call centers • Cell phone • E-Commerce • Software • IT Parks IT & TelecomPower • Hydel • Thermal • Coal • Solar • Wind • Biogas • Hydel • Thermal • Coal • Solar • Wind • Biogas • Coal • Granite • Marble • Semi-precious stones • Copper • Rocksalt • Coal • Granite • Marble • Semi-precious stones • Copper • Rocksalt Mining 29
- 19. 36 • Ports • Roads • Urban Mass Transport • Water supply & sanitation • Housing • Desalination • Ports • Roads • Urban Mass Transport • Water supply & sanitation • Housing • Desalination • Hotels • Resorts • Theme parks • Cultural tourism • Entertainment centres • Hotels • Resorts • Theme parks • Cultural tourism • Entertainment centres Infrastructure Tourism • Value added textiles & leather • Electronics • Sports & surgical goods • Furniture • Gemstones & jewelry • Food Processing • Value added textiles & leather • Electronics • Sports & surgical goods • Furniture • Gemstones & jewelry • Food Processing SMEs • Agri-business • Corporate farming • Fruits & vegetables • Livestock & dairy • Fisheries • Cool chains • Storages • Seed production • Agri-business • Corporate farming • Fruits & vegetables • Livestock & dairy • Fisheries • Cool chains • Storages • Seed production Agriculture 30 Priority Sectors
- 20. 37 Chemicals Engineering Privatization • Pesticides • Dyes • Agro Based • Mineral Based • Synthetic Fiber • Pharmaceuticals • Petrochemical Complex/ Naphtha Cracker • Pesticides • Dyes • Agro Based • Mineral Based • Synthetic Fiber • Pharmaceuticals • Petrochemical Complex/ Naphtha Cracker • Light & Heavy Engineering • Automobiles[ • Auto parts • Agriculture Machinery • Steel Production • Textile Machinery • Light & Heavy Engineering • Automobiles[ • Auto parts • Agriculture Machinery • Steel Production • Textile Machinery • Oil & Gas • Infrastructure • Power • Industry/ Real Estate • Banking • Oil & Gas • Infrastructure • Power • Industry/ Real Estate • Banking 31 Priority Sectors
- 21. 38 Pakistan - Home To Over 600 Foreign Companies Deutsche Bank ZTE
Editor's Notes
- <number> Good afternoon. My name is Reza Rahim, Senior Country Officer of JPMorgan Pakistan. On behalf of the Islamic Republic of Pakistan (or “Pakistan”) and the Joint Lead Managers for this issue (namely BMA Capital, Citigroup and Goldman Sachs) I would like to welcome you to today’s investor presentation. Today, the Republic of Pakistan is represented by its The Honorable Dr. Salman Shah, Advisor to the Prime Minister on Finance, who is seated at the center of the presentation table. To his immediate right/left is Dr. Ashfaque Hasan Khan, Director General of Debt Office and Economic Adviser to Pakistan
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- <number> The Pakistani government has introduced key reforms in recent years: Fiscal responsibility and Debt Limitation Act was promulgated in 2005 wherein certain targets have been set such as: Reducing the revenue deficit to nil not later than June 30, 2008, and thereafter maintaining a revenue surplus Within a period of 10 years (July 1, 2003 – June 30, 2013), the total public debt at the end of the tenth financial year should not exceed 60.0% of the estimated GDP for that year and thereafter maintaining the total public debt below 60.0% for any given year Ensuring that in every financial year, beginning from July 1, 2003 – June 30, 2013, the total public debt is reduced by not less than 2.5% of estimated GDP for any given year Tax reforms and a movement toward fiscal transparency, primarily through the simplification of the tax regime, reform of income tax, progressive reduction of rates and elimination of withholding taxes, and the streamlining and automation of institutions and processes involved with taxation; Financial sector reforms including granting of full autonomy to the SBP to formulate monetary, credit and exchange rate policies as well as in the management of foreign exchange reserves; more stringent directives on corporate governance of banks and listed companies; and increases in minimum paid-up capital requirements of banks A focus on privatization and deregulation, as demonstrated by the privatization of United Bank Ltd in October 2002 (US$ 207 million); Habib Bank Limited in January 2004 ($366 million); National Refinery Limited in May 2005 (US$ 273 million); Pak American Fertilizer Limited in February 2006 ($333 million); Pakistan Telecommunication Company Limited in March 2006 ($2.6 Billion); and a continuing process of privatization of government entities in Oil & Gas and financial sectors; Telecom sector was deregulated with issuance of two cellular licenses to Telenor from Norway and Warid from U.A.E. ($291 million each) coupled with issuance of 12 LDI licenses and several local loop licenses. Continued emphasis on reform in industry, investment policy, the agricultural sector and governance, including a devolution program
- Our national legislation on Protection of investment & network of BIT’s provides full security for investors. And more than 50 Bilateral tax treaties provides additional tax advantages for companies doing business out of Pakistan.