Why Invest in Pakistan?

Pakistan provides relatively strong protection for foreign investors, it ranks 19th worldwide on protecting investors, according to World Bank report Doing Business In South Asia 2007.

Top Reasons to Invest in Pakistan

Pakistan has the most liberal investment policy in the South Asia region. Some of the top reasons why Pakistan is a good destination for your investment:

Reason - 1: Geo-strategic Location

Located in the heart of Asia, Pakistan is the gateway to the energy rich Central Asian States, the financially liquid Gulf States and the economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities.

Reason - 2: Trained Workforce

Here the people are mostly English proficient, hardworking and intelligent. They have lesser costs.

Reason - 3: Economic Outlook

Pakistan is one of the fastest growing economies of the world having touched a GDP growth rate of 8.4% in 2005. Today Pakistan has 160 million consumers with an ever growing middle class. Foreign investment has risen sharply from an average of $400 million in the 1990s to over $ 3.5 billion in 2005-06. Fiscal deficit has declined from an average 7% of GDP in the 1990s to around 3% in recent years. And FOREX reserves have increased from $3.22 billion in 2000-1 to $13.14 billion in 2005-6.

Reason - 4: Investment Policies

Current investment policies have been tailor made to suit investor needs. Pakistan 's policy trends have been consistent, with liberalization, de-regulation, Privatization, and facilitation being its foremost cornerstones.

Reason - 5: Financial Markets

The capital markets are being modernized, and reforms have resulted in development of infrastructure in the stock exchanges of the country. The Securities and Exchange Commission has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector. Whilst the Central Board of Revenue has facilitated structural reform in tax and tariffs and the State Bank of Pakistan has invigorated the banking sector into high returns on investment.

Attractions of Investing in Pakistan

Previously, only the manufacturing sector was open to foreign investment. Now, the policy regime has been liberalized by opening up other economic sectors to FDI and by mobilizing domestic financial resources to encourage investment.

1. Foreign investors are allowed participation in industrial projects, on the basis of 100% foreign equity, without any permission from the Government.
2. No Government sanction is required for setting-up an industry, in any field, place and of size, except in the four specified industries.
3. There is no requirement to obtain a No Objection Certificate (NOC) from the Provincial Governments for the establishment of projects.
4. Full repatriation of capital gains, dividends and profits.
5. The facility for contracting foreign private loans is available to all those foreign investors who make investment in the approved sectors.
6. Foreign controlled manufacturing concerns are allowed to borrow on the domestic market according to their requirements.
7. Foreign controlled semi-manufacturing and non-manufacturing concerns are can access loans equal to @ 75% & 50%, respectively, of their paid up capital including reserves.
8. There is no restriction on payment of royalty / technical fee etc., in the manufacturing sector, allowed non in non-manufacturing sectors, as per guidelines approved by the Cabinet committee on Investment. Further information can be supplied by BOI.

Pakistan Investment Policies

Foreign investors can invest in the manufacturing sector on 100% equity basis (see priority sectors question below). In the non-manufacturing sector, foreigner can invest after meeting terms and conditions, as detailed in the investment policy. Investors can repatriate capital, capital gains, dividends & profits in full.

Incentives exist for foreign investors:

Pakistan has the most liberal investment policy in the South Asia region New incentives and further liberalization measures include:

• reducing minimum foreign equity from US$ 0.5 million to US$ 0.30 million,
• remittance of royalty, technology and franchise fee allowed to projects in social, service, infrastructure, agriculture and international chains food franchise,
• zero import duties on capital goods, plant and machinery and equipment not manufactured locally. CBR can supply a list of locally manufactured good. In case of doubt the investor is invited to consult the BOI.
• Enhanced FYA from 50% to 75% of PME for infrastructure and agriculture projects.
• The import tariff on agriculture machinery (not manufactured locally) for registered corporate agricultural projects will be zero-rated.
• The investors who invest in the newly opened sectors can import plant, machinery & equipment (not manufactured locally) at concession rate of customs duty which is 10% and also avail first year allowance @ of 50% of the cost of plant, machinery & equipment.
• Zero import duties on raw materials used in the production of exports.

International Views on Pakistan Economy

Views on Pakistan's economy from some of the reputable international institutions:

JP MORGAN

• Pakistan 's economic performance in the past five years has been commendable. GDP growth is higher, poverty rates are down, inflation is lower, FDI is up, and fiscal deficits are down. Driving all of these improvements has been an environment of relative political stability under the pro-reform administration of President Musharraf and Prime Minister Shaukat Aziz. Its run of success brought Pakistan 's stock onto the radar screen of foreign fund managers. Added to this, investibility improved due to the increase in market capitalization, aided by higher free float through new stock market offerings. These favorable dynamics in the size and efficiency of both the physical and human capital stock make a 6-7% target range for medium-term growth seem very reasonable, in our view. The IMF, in its recently completed Article IV consultation, uses a baseline assumption for real GDP growth of 7%.

MERRILL LYNCH

• Pakistan 's GDP growth in 2007 will range between 7-7.5%, based on recovery in agriculture sector and capacity expansions in the manufacturing sector. Merrill Lynch expects Pakistan to issue a Eurobond this year which it expects to be over-subscribed. Market capitalization surged 5.5 times from US$7 billion to US$46 billion over a period of four years, taking stock market capitalization to GDP from 9% at end-FY02 to around 36% at end-FY06.

ASIAN DEVELOPMENT BANK

• The economy has grown strongly over the past years, at an average pace of 7.5%. In recent years, the Government's strong macroeconomic policies, high growth rates, increases in pro-poor spending, and burgeoning workers' remittances have all contributed to a steep decline in the incidence of poverty and the unemployment rate.

GLOBAL PROSPECTS REPORT

• Pakistan 's GDP is expected to pick up to 7 percent in 2007 bolstered by an expansion in agriculture production and increased capacity following government infrastructure investments and private sector investments in the textile sector.

INDEX OF ECONOMIC FREEDOM

• The 2007 Index of Economic Freedom jointly conducted by the Heritage Foundation and the Wall Street Journal, has put Pakistan at the 89 th place, ahead of India (104) and China (119) out of 161 countries.

S&P ratings:

Standard and Poor's in December 2006 announced upgrades for credit ratings to:

• B+ for foreign currency,

            -> BB for local currency long-term ratings, and
            -> B for short-term sovereign ratings.

MOODY'S INVESTORS SERVICE 2007-ANNUAL REPORT ON PAKISTAN

• The country's rating for foreign currency bonds and the government's rupee dominated debt reflect the significant improvement in Pakistan 's external liquidity and the government's more efficient macro-economic management in the recent years. As a result of privatization, consolidation and restructuring. Moody's investor service upgraded Pakistan 's foreign and local currency government ratings from B-1 to B-2.

DOING BUSINESS REPORT, 2007 BY WORLD BANK

• Pakistan was top reformer in 2006 and the runner up reformer in 2007. Recent reforms have resulted in a drop in the number of days required to import in Pakistan : from 39 to 19 days. Pakistan also reformed positively in the area of taxation by steadily reducing its corporate tax rate, from 39% in 2004 to 35% in 2006. Pakistan scores well on the indicators related to starting a business (54th out of 175) and protecting investors (19th out of 175).

GLOBAL COMPETITIVE INDEX & BUSINESS COMPETITIVE INDEX REPORTS

• Pakistan had a relatively good showing on the BCI, developed by Harvard Business School competitiveness expert, In the new BCI, Pakistan ranks 67th among 121 countries. On the GCI, Pakistan improved from last year's 94th place to 91st place out of 125 countries that participated in this year's survey. Pakistan 's gains take on added significance when compared to the drop in rankings experienced by many noteworthy emerging markets.