July 15--JEDDAH -- Pakistan has emerged as a good place for investment and its stock exchange is one of the best performing bourses in the emerging markets, says Pakistan Senator Mohammad Ishaq Dar, minister of finance, revenue, economic affairs, statistics and privatization.
"When I give different reasons for Pakistan to be a good place for investment, it is necessary to mention that from the day of elections the stock exchange of Pakistan has emerged as one of the best performing bourses in the emerging markets," Dar told Arab News in an exclusive interview.
"From the day we won the election -- on May 11, 2013 -- till now, market capitalization has gone up 40 percent in both rupee and dollar terms. The market cap is around $70 billion now," said Dar who was in Jeddah to attend a meeting of the board of governors of Islamic Development Bank (IDB).
"The meeting went very well. At the sidelines, we had different meetings with the Islamic Corporation for the Development of the Private Sector (ICD), International Fund for Agricultural Development (IFAD), Saudi Development Fund (SDF), International Islamic Trade Finance Corporation (ITFC) and with Minister of Finance Ibrahim Al-Assaf and other foreign ministers of IDB member countries.
Dar had a word of praise for the IDB which, he said, was playing a key role in promoting Ummah's interests in issues such as trade and project financing.
He singled out IDB President Ahmed Mohamed Ali for rendering great services.
"I am happy to see that his term is extended for another five years, which the board of governors unanimously approved. Happy to see he has been awarded the King's award for his contribution as the IDB president."
He described the talks as "very positive and productive both bilaterally and multilaterally."
With the counterparts of different countries, the Pakistani team discussed matters of mutual interest. Also, the talks focused on regional connectivity, CASA-1000 electricity project, and held meetings with Afghanistan, Tajikistan and the finance minister of Iran.
"We also discussed the upcoming meeting of D-8 in Turkey," said Dar, who performed Umrah and visited Madinah during his visit.
The IDB has been a development partner with Pakistan right from the beginning.
"We are one of the founder members of IDB. They give balance of payments support with loans of about $500 million, which are reasonable. But they keep revolving. Last year it was around $1 billion and it was repaid whenever they were due. Now it is about $500 million. They provide trade finance; they provide project financing. They are financing the Neelam Zhehlam project and some other energy generation projects."
Senator Dar also said: "We have discussed the expansion of trade finance with Saudi Arabia in detail. So it will be close to $1.5 billion. Last year, it was $1 billion and this year it will be $500 million. So in the near future they will go for a $2 billion support in trade finance, which will be a meaningful business between Pakistan and the IDB's subsidiary ITFC."
The minister said he had given them a proposal and they were very excited about it.
"We hope we will be doing good business with each other," he said, adding that there are different types of involvements.
About Saudi-Pakistan relations, Dar said Pakistan always cherished great friendship and brotherhood with Saudi Arabia.
"Our leadership has always had personal and brotherly relationship," he said.
He said: "My meetings with Custodian of the Two Holy Mosques King Abdullah and Crown Prince Salman, deputy premier and minister of defense, are very memorable to me. We have good memories of meetings with Deputy Crown Prince Muqrin."
Sentator Dar also praised his meeting with Finance Minister Al-Assaf during his visit.
"Saudi Arabia is a tested friend of Pakistan of all times and all weathers. We wish Saudi Arabia all the best," he said.
"We believe that for Saudi Arabia Pakistan is a second home and for Pakistan Saudi Arabia is a second home. We pray for the prosperity and wellbeing of the leadership and the people of Saudi Arabia. We would request them to keep praying for prosperity, wellbeing and welfare of Pakistan," he added.
On the trade side, he said: "I think we basically import crude oil from Saudi Arabia. We also export different things. Some goods come directly. And some goods go indirectly. There is great potential to expand trade and investment between the two countries. We are working on that."
He recalled Pakistan's commerce minister's recent visit to the Kingdom and said: "We have great scope. Our relationship is very deep and we have great scope for expansion in boosting trade and investment ties. We import about $ 2.5 billion to $3 billion worth of oil from Saudi Arabia annually."
With Bill & Melinda Gates Foundation, the IDB is carrying out a polio eradication program in Pakistan. They plan to spend $227 million in Pakistan over a period of two years.
The IDB president also visited Pakistan recently. He met with Ulema in order to discuss with them that polio is not anti-Islam. Dar said the IDB chief held talks with him and he also called on the president of Pakistan also during his Pakistan visit.
There is a long association between Pakistan and IDB, Dar pointed out.
"We hope the IDB plays a more proactive role in years to come to have better integrated trade and commercial relations between the Ummah countries. I think there is great scope," the minister said.
Dwelling at length on Pakistan's consistently improving economy, Dar said the exchange rate initially shot up to Rs.111 a dollar at one time but has now gone down to Rs.98 to Rs.99 a dollar, and it has remained stable for the last four months after the government took certain corrective measures.
"Both the forex market and the rupee are stable. So, all signs are positive for foreign investors to enter the Pakistan market."
Asked how foreign investors had been looking at Pakistan, Dar said they had showed reluctance in looking toward Pakistan up to last year, before the new election, because the predictions and calculations about its economy were not very positive. "The fear was that the Pakistan economy would not be able to sustain and probably would go in default by June 2014, if you recall."
He said: "Obviously, neither the individual nor the corporate foreign investors were looking toward Pakistan, nor the multilateral donors like World Bank, IMF, Asian Development Bank and other institutional agencies were willing to deal with Pakistan with declaration of economists and international experts that Pakistan will go in default. That is a year and a half ago and there was no business."
In the last one year, however, things have changed in Pakistan. "God has been kind. We are in the federal government for the third time. We have turned around the economy. We have taken the right direction," said Dar, sounding confident.
The federal finance minister stressed that Pakistan had undertaken "very painful" structural reforms. "We have introduced very deep stabilization measures. In consequence of all that, the economy has started picking up."
Dar also ruled out the danger of Pakistan going into default. Its GDP growth has gone up the highest in 6 years about 4 percent plus and "we are hoping and planning that next year it will go to 5 percent and the third year 6 percent and the fourth year 7 percent (2017)."
On the budget deficit side, Dar said, the country had improved its economy tremendously.
"We have brought the fiscal deficit from 8.8 percent to already under 6 percent. This is a huge cut. In the next two years, we will reduce to 1 percent and bring it to 4 percent, which is an internationally accepted norm."
Even as Pakistan's foreign investment scenario is rapidly changing for the better, overseas remittances continue to go up. In fact, home remittances have been the highest in the last one year, when remittances increased 12.4 percent roughly. They reached around $14 billion (up to May) in 2013-2014 (11 months).
"Our exports have grown 4 percent and our reserves increased from an all-time low to around $7.5 billion in February because of the repayment of the loans of previous governments. He said: "Now, we have already crossed $14 billion by end of June. The economy has shown good progress. All international institutions are doing business with Pakistan."
Dar said the World Bank had drawn up a program of loans after five years. The Asian Development Bank also approved $900 million loans for electricity projects.
"We have gone to the international bond market after 7 years. The previous government tried but they could not do it."
He emphatically stated: "We offered $500 million to sell but the international bond market offered $7 billion. I decided to sell $12 billion. I have left room for sukuk, which we will offer before September."
About Pakistan's keenness to divert its economy on Islamic bonds gradually, Dar said he had already set up a very high-powered steering committee on promotion of Islamic banking in the country under the chairmanship of the deputy governor of the central bank (State Bank of Pakistan).
"We have entered the international equity market. We offered United Bank shares. Eighty-one percent shares were taken by international investors in foreign currency that is roughly $400 million shares. We have offered shares worth Rs.16 billion in PPL (Pakistan Petroleum Ltd.). Shares were taken at higher than offered price and the issue was oversubscribed heavily," the minister added.
By September, Dar said, Pakistan will go to the London Stock Exchange (LSE) to offload a small portion of Oil & Gas Development Corporation Ltd. (OGDCL). This is about $850 million and these shares will be listed in LSE.
"We hope this will be oversubscribed as all our issues are oversubscribed."
Dar quoted Japan External Traded Organization (JETRO), a very credible survey company, which has said that if Pakistan does what it is doing now in the past one year, and if it stays on course and does not change, then Pakistan will likely be the second most favorite country for foreign investors.
The Overseas Investor Chamber of Commerce and Industry (OICCI) has rated Pakistan as a very favorite place for investment.
"The rating was negative before. Their rating was -34 and now it is +2."
Economist O'neil's survey, carried out by BBC, shows by 2050 Pakistan will grow from 44th to 18th economy of the world.
"We are happy with the (jump from) 44 to 18 but we are not happy with the time. We want to reduce it," Dar said, emphasizing that the international sentiment is very good. "Everybody wants to do business with Pakistan."
Dar says the country's tax collections have grown 16 percent. Last year, it was only 3 percent. Now, things are shaping up. "We are also focusing on exploration and production of hydrocarbon (oil and gas) in Pakistan. Pakistan has great potential."
He said: "Our production although small has increased about 30 percent in last one year. Our crude oil production has gone up from 72,000 barrels per day to 105,000 bpd. On the economy side, world is saying that Pakistan has taken a direction. It has produced speedier results than expected."
Asked to throw light on India-Pakistan relations and their bilateral trade prospects, Dar said: "We have a very clear plan. We want regional peace, regional trade connectivity, regional promotion of business and investment. At one side, we are working with China to make an economic corridor, which will reduce the distance to half from China to Gwadar and will cut the freight to half. Then we are working with Afghanistan and Tajikistan for the CASA-1000 electricity transmission line. They can sell (electricity) to Pakistan and Afghanistan."
Pakistan will be working with India, he said. "We worked with the previous (Indian) government. We want to ease visa restrictions for both countries' businessmen, visitors, tourists, and we want to expand the trade between the two countries."
Pakistan's trade with India is reasonable but it can be expanded further, he said. "Once the composite dialogue with India starts on all subjects, including Kashmir, then we will be ready to negotiate with them to minimize the negative list," said Senator Dar.
"Non-discriminatory market access (NDMA) is the new terminology used between us. We will try to reduce the negative list to bare minimum."
Dar said he personally saw a good potential in Pakistan's relations with India, "but that depends on how India moves. We are handling terrorism. Terrorism is unfortunately an evil, which needs to be jointly fixed. We are working very hard. We have suffered the most. Pakistan has lost $103 billion because of terrorism and post 9/11. Our economy suffered the most. We have lost more than 40,000 people in the last one decade, including almost 5,000 soldiers. We have paid the heaviest price for terrorism."
Asked to comment on the suspension of flights to Pakistan by foreign airlines, Dar said: "What has happened in Peshawar recently is unfortunate. Once we sort out things, we are sure the foreign airlines will resume flights."
Dar also came up with a guideline for overseas Pakistanis.
Among them, his message to Pakistanis living abroad is that they should send their remittances through proper banking channels.
He reminded them that the remittances are free of cost. "The government pays the charges. They should avail that. We have also banks to speed up their transactions."
Dar also reminded them that they are (unofficial) ambassadors of Pakistan in every country they work. They should follow the law of the land so they are recognized as good ambassadors of their country. What is more, they should also invest in their home country.
"Pakistan will be a good place for their future settlement and investment, obviously," the minister said.
About remittances from overseas Pakistanis, Dar said: "We were expecting an 8 percent growth in remittances but now the growth is 12.4 percent in 11 months. We have given overseas Pakistanis one main thing in the budget. When they used to call Pakistan, it was costing them extra Rs.9 per minute. We have reduced those charges in the budget to minimum Rs.2 and maximum Rs.3 to compete. Most of the overseas Pakistanis welcomed this move."
(c)2014 the Arab News (Jeddah, Saudi Arabia)
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