20 February 2005

ISLAMABAD - KEY sectors for Saudi investment in Pakistan have been identified by Dr Hashim A. Yamani, Minister for Commerce and Industries along with his Pakistani counterparts.

The sectors with high dividend, product demand and export potential that were identified include: telecom, information technology, electricity generation, hydel power projects, housing, livestock, food processing, floriculture, agriculture and dairy farming. Saudi companies can invest capital on their own, or join hands with Pakistani business partners in joint ventures.

These decisions were taken at this week's Saudi-Pak Joint Ministerial Commission (SPJMC), where Dr Hashim A. Yamani led the Saudi side. Pakistan was represented by Minister for Commerce Humayun Akhtar.

This was seventh session of SPJMC has the potential of being a water shed in expanding Saudi investment in Pakistan, and trade in the Saudi-Gulf-Pakistan region. Several decisions were also taken to enlarge trade between the two countries, and between Pakistan and Gulf Cooperation Council (GCC).

Technical consultations between GCC and Pakistan will start in March to finalise the proposed Preferential Trade Agreement (PTA). Dr Yamani said, Saudi Arabia will take necessary steps to help finalise PTA between Pakistan and GCC in order to step up trade manifold.

The non-oil trade between Pakistan and Saudi Arabia, now $400 million a year, will double within the next two to three years, Dr Yamani informed the SPJMC.

Dr Yamani, in his discussions at the SPJMC, and in meetings with President Pervez Musharraf, Prime Minister Shaukat Aziz, Industries Minister Jahangeer Tareen, and Petroleum Minister & Natural Resources Minister Amanullah Jadoon, desired enhanced bilateral trade and economic cooperation with Pakistan, both in the public and the private sectors. "There is a need for a strong public and private sector partnership between the two countries," Dr Yamani said.

The two countries will study the complementaries in their economies to encourage the private businessmen to invest equity in high priority fields. Dr Yamani assured Akhtar, business travel to Saudi Arabia will be facilitated and the existing visas difficulties eased.

Akhtar told SPJMC: "Strengthening and deepening trade and economic relations with Saudi Arabia is a priority area for Pakistan. It has emerged as a country with a developed banking and financial sector and a free market economy. This is one of the most significant and positive regional development."

"This is an excellent time to invest in Pakistan," he said. Pakistan offered Dr Yamani and the Saudi business team to invest, particularly, in value-added textiles, fruit and vegetables processing, shrimp farming, engineering products, European model small cars and tractors, renewable energy, construction and petrochemicals.

Pakistan is offering Saudi, Gulf and Middle East investors good prospects because the buyer-driven FDI present lucrative opportunities in its traditional and core sectors that include textiles, ready-to-wear garments, clothing, leather and footwear, rice processing, surgical instruments, electro-medical appliances, sports gear, horticulture, shrimps farming, fruits & vegetables, furniture, marble & granite, gems, and jewellery.

Abdullah A. Al-Hamoodi, Saudi Deputy Minister for Foreign Trade, Abdel Abdullah Kaki, Vice-Chairman of Saudi Chamber Council and a 30-member high powered delegation of businessmen, industrialists, and investors accompanied Dr Yamani.

They explored investment opportunities in diversified fields and have shown keen interest in manufacturing, and construction of pipelines, onshore and offshore exploration of energy and cooperation in Pakistan's mineral sectors.

Amanullah Khan Jadoon, Minister for Petroleum and Natural Resources invited Saudi investors to establish a coastal oil refinery, and invest in oil and natural gas exploration, cross-border oil and energy pipe lines and exploration and minerals development.

What are the real prospects of Saudi investment in Pakistan? "Saudi investors are eyeing Pakistan as one of the most conducive destinations for investment in view of its friendly policies and fast expanding economy," Dr Yamani said. He places his expectations on, what he calls, "the remarkable growth and stability of Pakistan's economy which offers an excellent example of how a Muslim country can succeed in a highly competitive world scenario."

While discussing Riyadh-Islamabad relations President Pervez Musharraf said to Dr Yamani, "we can take our economic relationship to higher levels, to our mutual benefit, by translating these wonderful fraternal ties into a vibrant and dynamic trade and economic cooperation.

Dr Yamani, in his meeting with Prime Minister Shaukat Aziz, assured him of "an increased investment in Pakistan, and to double the two-way trade volume in the next two to three years.

"The current two-way trade is $400 million. "The economic turn around in Pakistan is phenomenal and we are highly impressed by the transparency and clarity of policies here."

Pakistan achieved $14 billion of exports last year, while Saudi non-oil exports have also increased to over $11 billion this year, indicating the prospects of enlarging exports, bilaterally and globally, he said.

Aziz informed Dr Yamani, Pakistan offers a level playing field to all investors and best returns on investment, in most cases ranging from 20 to 60 per cent a year. Aziz identified telecom, real estate and engineering as the potential areas for Saudi investment, while almost all sectors of the economy are open for foreign investment. Investors are free to repatriate profits, he assured.

Pakistan is also privatising a large number of its state-owned enterprises (SOEs) and mega projects, ranging from telecom to oil marketing, and banks to energy that are also available to foreign investors. In fact, only last week, it sold 73 per cent shares, with management control, of the huge Karachi Electric Supply Company (KESC) to Saudi Arabia's Kanooz Al Watan for Projects of Saudi Arabia, for $ 267.3 million.

Together with additional investment, in KESC, Kanooz will spend a total of $ 341 million on this power utility. Islamabad regards this sale as a sign of foreign investors' confidence in its economy and profitability. Other Saudi and Gulf investors are now in the field to buy several SOEs ranging from telecom to oil.

Dr Yamani informed Aziz: "Saudi businessmen are impressed by economic development in Pakistan, and have expressed their keen desire to invest in this country." Saudi and Pakistan leaders have also agreed to sign two agreements: on protection of investment, and avoidance of double taxation.

Aziz, over the weekend, was guest at the Jeddah Economic Commission, along with a delegation of top businessmen, to explore opportunities of joint ventures and other areas of collaboration, besides discussing measures to increase trade with Saudi Arabia and GCC countries.

As a sign of growing business, economic and financial relations, the just concluded SPJMC saw signing of an agreement, in Islamabad, by Saudi Bashair Holding Company of Jeddah and Pakistan's Al-Zamin Modarba, to establish an Islamic Commercial Bank (ICB) in Pakistan and a leasing company in Saudi Arabia.

Dr Abdullah Baabod signed the agreement for Saudi Bashair Group, and Basheer A. Chowdhry and M. Moizul Haq signed for Al-Zamin Group.

The Saudi group and Pakistani investors will provide equity for the proposed ICB. The leasing company to be established in Saudi Arabia will do 'Ijara', 'Musharika" and "modaraba' business.

BY M. AFTAB

© Khaleej Times 2005