1.The current government has now been in power for over six months. How do you see Pakistan evolving under the PTI government?
At the outset, I would like to say that Pakistan has taken transformational steps to open doors for businesses. As you know, Pakistan has been at the centre of a lot of geopolitics in the past two decades and we are still dealing with the conflict on the Western boarder with Afghanistan. Investors have shied away from the region and it was about 5 years ago that Pakistan got back on the right track. That phase is now well-developed and we have good connectivity infrastructure from Gwadar port to Western China with a road being built as well as energy projects along the way. When this government came into power, one of the Prime Minister’s very first speeches was that the ease of doing business would be one of his top priorities. In the past six months, the government has successfully given four messages to the world and to local investors. The first was to improve the ease of doing business and to be open for business. The second was to put a level playing incentive structures for local and foreign investors. The third message was that the Board of Investment would provide all facilitation to the investors, wherever they come from and finally that Pakistan needs investment that brings managerial expertise and technology transfer for enhanced productivity and market access.
2. Pakistan jumped 11 places in the World Bank’s annual Doing Business Report 2019 and now ranks 136th. How can Pakistan improve further its ranking in the Doing Business Report?
The government is aiming to improve the Ease of Doing Business by doing by simplifying the company registration, taxation reforms, giving easier access to credit, improving the energy mix and enforcing contracts. We have chosen these five indicators, as they are the ones where we perform worse and we are trying to improve them every day. We have done reasonably well in registering companies, in terms of trading and in protecting minority rights. My personal target is to get below the 100 mark by the end of the year. We are converting payment procedures into online systems, to cut corruption. This is only the start and we now have a dedicated team 24/7 only focusing on this. My overall target is to get Pakistan into the top 50 countries out of a total of 190+ countries in the years to come. Another very important factor is that we need to enhance technology so that businesses get access to an online platform to sell their goods. We also need to remove structural issue, which are legal in nature. For instance, we need to repeal laws that are counter-productive and repressive to investments.
3. What is the role of the BOI? What milestones were accomplished in 2018 and what are your objectives for 2019?
The macro-picture is that Pakistan’s investment to GDP ratio was on average 15% over the last 17 years. This is 10% lower than the peer group average in Asia. The target in Pakistan should be a 25-30% investment to GDP ratio in order to attain a sustained 7% GDP growth over the next several years. Similarly, the savings rate is low so we need to redress that savings rate in order to attract investment.
The BOI is now focusing on four aspects to boost the economy. Firstly, there is the need of bringing emerging technologies to enhance productivity, then we need to focus our exports on value added goods, create employment as we have a very young labor force coming into the market and finally build special economic zones (SEZ). We have invested in nine new economic zones in Pakistan and we already have seven zones. These 16 zones are under regulation of the BOI but we have a major coordination issue in the sense that under our constitution, provinces are the ones responsible of their land development so it creates a challenge. Our priority as a country is to make these economic zones a one-stop shop where setting up a business is hassle free. The BOI’s mandate is to facilitate investment facilitation, promote investment and to regulate investment policymaking.
4. How important is it for foreign companies to get a local business partner when they come to Pakistan?
You do not need a business partner to set up a company and foreign companies can take 100% of their dividends and profits out of the country, there are no legal restrictions. However, it is recommended that you have local partners for two reasons; Firstly, for their knowledge of the local environment and secondly a foreign firm brings with it technology and knowledge transfer which will allow a specific industry to grow and be nurtured.
5. What special efforts will be made in order to bridge the gap between the private and public sector?
First of all, the legislation has been put in place for public-private partnerships (PPP). As a consequence, government’s role is to make policies that regulate businesses. The privatization program has restarted and the government has put an important number of public companies on the list for them to become private. We recently signed an MOU with the Chinese for an industrial cooperation framework where The Board of Investment partners with the private sector in order to facilitate such transactions. It reduces the gap in communication between the two parties; we also look for a partnership model between our Chinese counterpart and a local private company.
I am reaching out to the private sector in an institutional manner in order to improve the ease of doing business. From government structures to mixed structures to purely private sector outsourcing, we try to bring in the private sector at a local and international level. The BOI closely works with the Overseas Chamber of Commerce and with foreign companies to look at external opportunities. My biggest ambassadors are the international investors who have been here for years.
6. Which strategic sectors are in need of most development for investors?
I am currently getting a lot of interest in four sectors, first is the petrochemical and oil refinery sector, Gulf countries such as Saudi Arabia, the UAE and Qatar as oil producing countries are investing and looking at opportunities in Pakistan. The second is food production, there is interest from all over the world as our neighboring countries have a food deficit, there is a great opportunity in increasing our food production in order to export it to our neighbors as well as worldwide. Dairy products are also attracting interest, for instance the demand for cheese in China has gone up 200% over the past couple of years. The third sector is Information Technology (IT) as well as engineering products as our workforce is very well trained in that domain, we export over 50% of our IT products to the United States. The final sector is Tourism; there was a 500% increase in domestic tourism last year due to the improvement in the security situation. External tourism in also on the rise, the country received 1.5 Million visitors last year. We need to bring more investments in this sector, as we do not have the right infrastructure to cater all these visitors and we need to have a better hotel space.
7. Pakistan is facing competition from neighboring countries such as India, Bangladesh and South East Asian countries? What differentiates Pakistan from these countries? and how can it deal with the growing competition?
My biggest challenge is that Pakistan needs to catch up with emerging Asian economies. We have lagged behind because of prolonged conflict in this region, which gives us a good opportunity to catch up and to replicate some of their successful growth models. The competitive advantages of Pakistan are; firstly, a strong Agro-base sector, which will only be growing in the coming years, secondly, the IT skill-set of our population and our location. The cost of an engineer in India and China is almost double the cost of a similarly qualified worker in Pakistan. The third competitive advantage is energy,especially renewable energy, as our energy capacity is expected to double in the next 10 years; our cost of doing business is getting competitive. I am happy to report that five international auto manufacturers have not only shown interest but some of them will be setting up their plants in Pakistan in the next two years. There are two Korean companies, Hyundai and Kia which have already moved in Pakistan and are setting up their businesses. Suzuki has shown the intention to expand their activities by another half a billion US dollars and Volkswagen and Renault are currently planning their entry into the market.
8. Since 2014, FDI has been on an upwards trend in Pakistan reaching $3.09 Billion in 2017- What is being done to encourage FDI coming into Pakistan? Which countries are investing most into Pakistan? And Can you name a few success stories of foreign investors that have succeeded in this country?
We have now entered into the industrial cooperation phase in the China–Pakistan Economic Corridor (CPEC). The first phase from 2015-2018 was purely infrastructure and the industrial cooperation phase is all about investment. In terms of success stories, we have an electric hybrid car manufacturing plant called Foton from China which came in a few months back under this government. There are a number of projects under the pipeline coming from China and a Joint Venture in glass manufacturing was also done. We are currently negotiation with
Huawei for them to start manufacturing their phones here. Saudi Arabia is setting up an oil and petrochemical refinery in Gwadar through Aramco, it is likely to bring eight to $10 billion worth of investment. UAE is also keen to invest in the oil & gas sector here and the Malaysians have given us concrete interest in education. We recently signed four MoUs with Malaysia in car assembly, telecom, Halal meat and IT sectors.
9. With the previous administration (CPEC), Pakistan has been shifting its interest towards China, but there is room for more. Please give us some insight into US investments in Pakistan and the sectors you are looking to bolster with it?
The United States investment in Pakistan has been low over the past few years, it does not reach the Billion US Dollar. I believe that in 2018, we received $59 million of US investment and they come from multinational beverage companies such as Coca Cola and Pepsi and these investments do not directly come through the US but from their regional headquarters such as Turkey. I am very pleased that Exxon Mobil and Cargill have decided to come back to Pakistan; it is a very positive step forward. The US has recently been inward looking in its investment since President Trump came into power but there is a huge Pakistani Diaspora base in the Silicon Valley and they are looking at setting up joint ventures in the IT and software businesses in Pakistan. The USA has a competitive advantage over the world in terms of managerial expertise and we want good business practices and knowledge coming into the country. If the USA is looking to expand its regional activities then it should start looking at Pakistan as it is a huge untapped market and a very well strategically located country. The US unfortunately is currently not in the top five markets in my priority investment map.
10. After working as the Regional Advisor to the World Bank Group for promoting economic cooperation in South and Central Asia, heading the Economic Growth Group at UK’s Department for International Development (DFID) and serving as the Executive Director of the Securities and Exchange Commission of Pakistan, what do you feel most proud of?
My biggest successes are certain very tangible deliverables. I was part of the team, which created the Securities and Exchange Commission of Pakistan (SECP). I created an institution which is something you take pride in. When I was in the Department for International Development (DFID), I increased the economic growth portfolio to Pakistan from 30 million pounds to almost 800 million pounds of grants, we created a huge amount of institutions and financial inclusion as well as skills development and cash transfer funds. As a Senior Regional Adviser at the World Bank, I am very proud of a project called CASA-1000, I negotiated the electricity transmission line from Central Asia, Kyrgyzstan and Tajikistan all the way to Pakistan and Afghanistan, the project was worth over a billion US Dollars. I am very satisfied that my efforts have yielded tangible results. My biggest challenges at the BOI are that the targets I have set are twofold. My first objective is to show Pakistan among the top 50 countries in the ease of doing business report and my second is to show successful investment transactions that are happening in the country, I want to expand Pakistan’s network with the international community.
11. What is your final message to the readers of USA Today who consider Pakistan as a potential investment destination?
Please come and visit Pakistan, we welcome both tourists and investors. We have recently introduced transformational visa facilitation reforms. This is an untapped market with huge opportunities in all types of sectors; companies coming here will have a first mover advantage. This country deserves a change after many years of internal and external conflict; it is now stable and ready to attract all type of investments.