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1 0 Pakistan’s Privatisation and Investment Policies November 2006.

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Presentation on theme: "1 0 Pakistan’s Privatisation and Investment Policies November 2006."— Presentation transcript:

1 1 0 Pakistan’s Privatisation and Investment Policies November 2006

2 2 Agenda –Pakistan Macro Economic Outlook –Privatisation Policy & Opportunities –Investment Policy

3 3 Pakistan Macro Economic Outlook

4 4 Background –Population: million (2006 est) –GDP (Nominal):US$129bn (FY06) –GDP per capita: US$847 –Country Rating: S&P – B+/Positive, Moody’s – Ba3 –FX Reserves (June 30 th 2006): US$ 13.1 billion –Stock Market Cap. (July 27 th 2006): US$49.6bn –Primary exports: textiles, leather, rice –Primary imports: petroleum, machinery, chemicals Components of FY06 GDP Demographics Source: Economic Survey %<40yrs

5 5 An Increasingly Attractive Market Regional Comparison Source : Economic Survey , , IMF Annual Report 2006 – Chapter 1: Prospects for world growth *Annual estimates taken from IMF Annual Report 2006 Population bigger than Vietnam, Egypt and MalaysiaGDP bigger than Vietnam, Egypt and Malaysia Growth unparalleled*More fiscal space than others

6 6 Major Reforms Have Been Delivered Governance Reforms Capital Market Reforms Industry & Investment Reforms Major Economic Reforms Tax ReformsFiscal Transparency Agriculture Sector Reforms Financial Sector Reforms Deregulation, liberalization & Privatisation Fiscal Responsibility & Debt Limitation Act Consistency & Continuity In Policies

7 7 GDP and Per Capita Income Growth Pakistan’s GDP grew 6.6%YoY in FY06, while per capita income in current dollar terms grew by 14.2%YoY to US$846 in FY06 Source : Economic Survey , * At current dollar prices Per Capita Income*GDP Growth

8 8 Middle Class Growing And… Growing!!! Lowest 20% Middle 60% Highest 20% CAGR Growth in Selected Consumer Markets Since June 1999 Household Income Distribution (%) Source : Economic Survey , ; House Hold Survey

9 9 Export Growth Accelerating Export Growth Source: Federal Bureau of Statistics

10 10 Investment Cycle Gaining Momentum Investment as a % Of GDP Source: Ministry of Finance

11 11 Equity Market Outperforming Source: Benchmarked to 100; Econ-Stats CAS- Egypt KSE-PAK India BSE INAT - Turk

12 12 Currency Stabilization Reflects Optimism in the Pakistan Economy Exchange Rate (PKR/USD) Source : Economic Survey ,

13 13 Inflation and Monetary Flexibility Recent pressure in inflation is being managed carefully to ensure monetary flexibility Inflation Source : Economic Survey ,

14 14 Balance of Payments Manageable as… External deficits Source : Economic Survey ,

15 15 …Foreign Investment and Remittances Surging Foreign Direct Investment (US$ million)Remittances (US$ million) Source : Economic Survey ,

16 16 Strong Foreign Exchange Reserves Foreign Exchange Reserves (US$ million) Source : State Bank of Pakistan

17 17 Privatisation Policy & Opportunities

18 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”

19 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 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

20 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 –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 Key Recent Privatisations To date the current government has realised over US$5.3bn

21 21 Strong Privatisation Pipeline – Upcoming Privatisations SectorCompany NameStatusTotal 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 1, , , N/A N/A 3 Financial Institutions –National Investment Trust –Habib Bank –State Life Insurance –United Bank –SME Bank –Sale of management rights –IPO (10%) –IPO (up to 10%) –Strategic Sale N/A 3 8, , , N/A N/A 3 Power –Jamshoro Power Co –Faisalabad Electric Supply Co –Peshawar Electric Supply Co –Kot Addu Power Co –Strategic Sale –Secondary Offering N/A N/A N/A N/A Fertilizer & Chemical –Lyallpur Chemicals & Fertilizers –Hazara Phosphate –Strategic Sale N/A 3 Engineering –Heavy Mechanical Complex –HEC –PMPS –Pakistan Steel –Strategic Sale –Sale of management rights N/A N/A Minerals Tourism/ Restaurants –Salt mines –Coal mines –Pakistan Tourism Motels –Strategic Sale –Sale N/A 3 Source: Annual Reports1. End of FY05All figures converted at the rate of US $ 1 = PKR End of FY06 3. N/A – Not Applicable or Unlisted Companies

22 22 Investment Policy & Opportunities

23 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 Protection47 Countries  Avoidance of Double Taxation 52 Countries 7

24 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

25 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 ,524 3,521 Total Foreign Direct Investment

26 26 SourceMillion $Leading SectorsMillion $ U.A.E.2,067.8Communication2,714.2 USA1,619.0Financial Business Saudi Arabia348.2Oil & Gas & Petro Ref Norway431.0Power448.6 UK739.8Trade279.0 Others2,071.2Others1,619.5 Total7,277.0Total7, Total Foreign Investment Inflows ( ) Source : SBP Website – Net Inflow Of Foreign Private Investment ( ); Total Foreign Investment Flows = Foreign Direct Investment + Portfolio Flows

27 27 Top Investing Countries ( ) –Current, Value in Million US$, Percentage

28 28 Leading Sectors ( ) –Current, Value in Million US$, Percentage

29 29 SourceMillion $Leading SectorsMillion $ U.A.E.1,424.5Communication1,937.7 USA516.7Financial Business329.2 Saudi Arabia277.8Oil & Gas & Petro Ref312.7 Norway252.6Power320.6 UK244Trade118.0 Others805.4Others502.8 Total3,521.0Total3, Total Foreign Investment Inflows ( ) Source : SBP Website – Net Inflow Of Foreign Private Investment (Jul-June 2006); Total Foreign Investment Flows = Foreign Direct Investment + Portfolio Flows

30 30 Top Investing Countries ( ) –Current, Value in Million US$, Percentage

31 31 Leading Sectors ( ) –Current, Value in Million US$, Percentage

32 32 Investment Highlights: Compelling Economic Proposition Rising disposable income Growing population Compelling size of middle class Asset values rising Rising remittances Accelerating 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 Intensity Surging Domestic & Foreign Investment

33 33 Investment Highlights: Attractive Policy & Regulatory Fundamentals –Government Strategy –Infrastructure being brought up to international standard: power, water, telecom and transport networks being overhauled –Increasing expenditure on education: literacy rates rising with increasing enrollment in higher education –Business environment being made conducive: liberalization and deregulation policies –Access to capital: increasing focus on providing finance to SME’s –Leveraging physical location: Pakistan being converted into Asia’s trade, energy and transport corridor –Cross party support for reform process e.g privatisation

34 34 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

35 35 Oil & Gas Priority Sectors Offshore & onshore exploration Refining Pipelines Storages Call centers Cell phone E-Commerce Software IT Parks IT & Telecom Power Hydel Thermal Coal Solar Wind Biogas Coal Granite Marble Semi-precious stones Copper Rocksalt Mining 29

36 36 Ports Roads Urban Mass Transport Water supply & sanitation Housing Desalination Hotels Resorts Theme parks Cultural tourism Entertainment centres Infrastructure Tourism 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 Agriculture 30 Priority Sectors

37 37 Chemicals EngineeringPrivatization 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 Oil & Gas Infrastructure Power Industry/ Real Estate Banking 31 Priority Sectors

38 38 Pakistan - Home To Over 600 Foreign Companies Deutsche Bank ZTE


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