Monday, October 1, 2012

US Seeding Venture Capital and Private Equity in Pakistan

US is providing $80 million to create multiple VC and PE funds in Pakistan. These funds will be run by professional fund managers who will be required to manage and raise additional money from other sources to start multiple funds. US Embassy in Islamabad told Express Tribune that they expect that "there will be substantial interest from local, regional and international investors”.

Polish Model:

The initiative is based on the Polish American Enterprise Fund model which was started with $140 million from US government and has now grown to several billion dollars of investable funds, according to Express Tribune.

US AID's Theodore Heisler said that co-investment was essential in bringing the size of each fund to a level where it can cover operating expenses. The funds will focus on investing in small and medium entrepreneurial companies which, the US Silicon Valley experience has demonstrated, are major drivers of innovation, economic growth and job creation. 

History of VC and PE Funds:

 In 2010, the Overseas Private Investment Corporation (OPIC) provided JSPE Private Equity Fund II $50 million with a target capitalization of $150 million.

Venture capital investing is not entirely new in Pakistan, according to Venture Beat. Silicon Valley insiders like Reid Hoffman, Mark Pincus and Joe Kraus, along with Draper Fisher Jurvetson (DFJ) and EPlanet Ventures have already started. In 2003, Hoffman, Pincus and Kraus invested in Monis Rahman, a Pakistani-American who left Intel for entrepreneurship. Rahman had successfully launched and sold a start-up in the Bay Area,

There are several investment firms in Pakistan, such as BMA Capital, Indus Basin Holdings and JS Private Equity, that offer examples of professionally managed funds. In addition, there are Social Entrepreneurial Funds like Acumen Fund, Dawood Foundation and Kashf Foundation which are very active in the SME sector in Pakistan.

Opportunity in Pakistan: 

Pakistan has the world’s sixth largest population, seventh largest diaspora and the ninth largest labor force. With rapidly declining fertility and aging populations in the industrialized world, Pakistan's growing talent pool is likely to play a much bigger role to satisfy global demand for workers in the 21st century and contribute to the well-being of Pakistan as well as other parts of the world.

 With half the population below 20 years and 60 per cent below 30 years, Pakistan is well-positioned to reap what is often described as "demographic dividend", with its workforce growing at a faster rate than total population. This trend is estimated to accelerate over several decades. Contrary to the oft-repeated talk of doom and gloom, average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.

A 2012 World Bank report titled "More and Better Jobs in South Asia" shows that 63% of Pakistan's workforce is self-employed, including 13% high-end self-employed. Salaried and daily wage earners make up only 37% of the workforce. Even if one chooses to consider just the 13% who are high-end self-employed as entrepreneurs, it's still a significant population willing to take risks who can do better with greater availability of venture and private equity money.
A recent Pew Survey of 21 countries reported that 81% of Pakistanis believe in hard work to achieve material success. Americans are the second most optimistic with 77% sharing this belief followed by Tunisians (73%), Brazilians (69%), Indians (67%) and Mexicans (65%).


Promoting venture capital and private equity investments in Pakistan is a welcome initiative. It has the potential to unleash funding of new profitable ideas in small and medium size entrepreneurial businesses for significant returns to investors while also helping Pakistan achieve much needed economic stimulus with new jobs to lift more people out of poverty.  

Related Links:

Haq's Musings

Pakistanis Lead the World in Faith in Hard Work

Entrepreneurial Pakistanis

Financial Services Sector in Pakistan

Venture Capital Investing in Pakistan

Minorities are Majority in Silicon Valley

String Food and Beverage Demand Draws Investments to Pak Agribusiness

Strong Earnings Propel Pak Shares to New Highs

Pakistan's Underground Economy

Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers


HopeWins Junior said...

Dr. Haq,

Good article, in its own way.

"To a man with a Hammer, everything looks like a Nail"

I always find this noisy Silicon Valley exuberance a little confusing. I can tolerate the big words; it is just the brash noise that throws me off-balance.

Where does this new US Government effort with "angels", "VCs" and "private equity" fit into the exhaustive-list shown below?

Is it in 4(b)? Is it in 6(c)? Or is it in 7(a)? Or perhaps in 7(b)(i)(B)?

Would you please explain?

Thank you.


1) Gross Domestic Production (GDP)
2) Final Consumption
(a) Household Consumption
(b) Government Consumption
3) Gross Domestic Savings
4) Net Current Tranfers
(a) Remittances
(b) Foreign Aid
5) Gross Savings
6) Current (Trade) Account
(a) Net Bal in Trade of Goods
(b) Net Balance on Trade of G&S
(c) Net Balance on Current A/C
7) Capital (Financial) Account
(a) Change in Forex Reserves
(b) Net Balance on Capital A/C
(i) Net Foreign Investments
(B) Portfolio Equity
(ii) Change in External Debt
(A) Public Long-Term
(B) Private Long-Term
(C) Private Short-term
8) Gross Capital Formation
9) Inventory Levels
10) Gross Fixed Capital Formation
11) Net Fixed Capital Formation
12) Incr Cap to O/P Ratio (ICOR)
13) Trend GDP Growth Rate
14) RETURN to (1) for Next Year

Riaz Haq said...

HWJ: "Would you please explain?"

There is no one silver bullet, but increased investment in entrepreneurs in SME sector is a good thing for economic growth and job creation in any economy.

Riaz Haq said...

Here are excerpts of an ET article on private equity and debt markets as propellers of economic growth:

Let’s start by asking why are most investors in financial assets only interested in stock and bond markets, to the extent that even the premier CFA institute examinations and most university programmes almost solely focus on these two.

Here is why. These are the only two saving vehicles (asset classes) that are large, liquid and have visible prices. World public equity market capitalisation at $50 trillion (Bloomberg) and bond market debt outstanding at $95 trillion (CityUK), provides decent saving depth for global GDP (annual income) of $65 trillion.

The tangible asset market, mostly real estate (but including under/over-ground commodities and personal property), is even larger at $150 trillion, but is illiquid, due to relatively large ticket deal sizes and non-standardisation and hence is called an ‘alternative asset class’.

Private equity or shares of unlisted companies are interesting. They are grouped as alternatives due to liquidity constraints and big deal sizes, but otherwise seem the same securities, ie equity.

Before I elaborate, let’s try to ascertain the total size of private equity market. According to Credit Suisse 2011 Global Wealth Report, total net wealth in the world is $231 trillion. From this, we minus the value of ‘real’ assets, stock markets and $5 trillion in cash and demand deposits. The size of bond market is not included in the calculation as one person’s bond asset is another’s liability and it cancels out. Hence, estimated value of private companies comes to $30 trillion, which is smaller than the public equity market but still huge.
Conclusion: Private equity presents a huge universe of opportunities and can certainly add value to High Net Worth (HNW) portfolios containing only stocks and bonds, by both increasing return and lowering true volatility at the same time. It is certainly an alternative investment class, but not only because of low liquidity, but rather because it marries management science with pure investment.

Riaz Haq said...

Here's a Gulf Daily story on Pakistan's new rules for sukuk:

SYDNEY: Pakistan's regulator has issued new draft rules for the issuance of sukuk, or Islamic bonds, as part of a range of initiatives to boost the Islamic banking sector in the country.

Under the rules, sukuk will have to be structured to comply with standards of the Bahrain-based Accounting and Auditing Organisation for Islamic Finance Institutions(AAOIFI), as well as those set by the local regulator.

The draft rules also include requirements for disclosure of information about the issuers and for the issuers to appoint Islamic scholars who vet the sukuk structures.

There is a consultation period on the draft until October 15.

The number of individual sukuk issues in Pakistan has shrunk in recent years, despite the rapid growth of issuance globally, which is projected by Commerzbank to exceed $100 billion this year.

Last year, the Pakistani sukuk market was led by three sovereign sukuk which raised a combined 163.6bn rupees ($1.72bn), according to securities commission data.

Three corporate sukuk raised a combined 5.4bn rupees. This compares with 21 sukuk in 2007, most of which were corporate, raising a combined 49.3bn rupees. In 2008 there were 18 sukuk which raised 31.9bn rupees.

AAOIFI standards indicate how Islamic financial products should be structured; following the standards could increase the interest of foreign investors in investing in Pakistani sukuk.

Pakistan aims to lift Islamic finance's share of its banking sector through a series of reforms. Last month the central bank said it was developing a five-year plan for Islamic banking.

The country is introducing new rules for takaful (Islamic insurance) designed to increase competition.

Riaz Haq said...

Here's a Daily Times story on US support commitment to Pakistan:

US assures Pak of early release of $600 million CSF arrears

* US officials call on Finance Minister Hafeez Shaikh * Reaffirm US commitment for provision of $200 million for Diamer-Basha Dam

Staff Report

ISLAMABAD: The United States on Thursday assured Pakistan of an early release of $600 million Coalition Support Fund (CSF) arrears, increasing OPIC support for projects in Pakistan from $100 million to $1 billion, launch $80 million Pakistan Investment Fund for SMEs in January 2013 and also reaffirmed US commitment for provision of $ 200 million for Diamer-Basha dam.

US Ambassador to Pakistan Richard G Olson and Robin Raphel, senior adviser to special representative for Afghanistan and Pakistan, called on Finance Minister Hafeez Shaikh in his office. Issues of mutual interest, particularly economic ties between the two countries, were discussed in the meeting. Both the sides expressed their satisfaction over the pace of development in Pak-US economic ties.

Olson and Raphel congratulated the finance minister over his recent successful visit to United States of America and declared that the visit would prove a milestone in strengthening economic bonds between the two countries.

Shaikh informed the US delegation that the overall economic conditions in the country are moving in the right direction. The visiting delegation was informed by the finance minister that despite energy scarcity and security situation, Pakistan’s economy has started showing positive trends. The minister informed the US side that due to the policies of the government, Pakistan is witnessing lowest inflation rate in the region and trade balance deficit is on declining trend. The US delegation was informed that Karachi Stock Exchange is the best performing stock exchange in the world during the last one year.

The US officials assured the finance minister that the Coalition Support Fund (CSF) amounting to $600 million would be released without any delay. The visiting delegation also informed the Finance Minister that the United States is going to launch 80 million dollar Pakistan Investment Fund for SMEs in January 2013.

During the meeting the US delegation informed the Finance Minister that active participation of Overseas Private Investment Corporation (OPIC) in development of Pakistan would be ensured. The active participation of OPIC will increase the support for projects in Pakistan from $ 100 million to $1 billion.

The visiting US delegation also reaffirmed US commitment for provision of $200 million for Diamer-Basha Dam.

Both the sides discussed Pak-US bilateral trade also. The US delegation said that USA is trying to facilitate Pakistan’s exports to the United States to a maximum degree. It was further informed by the visiting delegation that US investment in Pakistan is witnessing ever increasing trend.

Olson and Raphel committed that the US would extend its cooperation to optimum level for timely completion of development projects in Pakistan.

The visiting delegation informed that the US would assist Pakistan in every possible way to overcome energy crisis. The delegation further told that assistance to Pakistan for development of social sector and infrastructure will also be accelerated.\12\14\story_14-12-2012_pg7_13

Riaz Haq said...

Here's an Express Tribune list of Pakistani companies with over a billion in revenue:

The Billion Dollar Club

1. Pakistan State Oil Company

Revenues: $11.57 billion

Joined club: Before 1986

2. Pak-Arab Refinery

Revenues: $3.00 billion

Joined club: 2000

3. Sui Northern Gas Pipelines

Revenues: $2.52 billion

Joined club: 2004

4. Shell Pakistan

Revenues: $2.38 billion

Joined club: 2000

5. Oil & Gas Development Company

Revenues: $2.23 billion

Joined club: 2005

6. National Refinery

Revenues: $1.97 billion

Joined club: 2005

7. Hub Power Company

Revenues: $1.97 billion

Joined club: 2009

8. Karachi Electric Supply Company

Revenues: $1.84 billion

Joined club: 2008

9. Attock Refinery

Revenues: $1.74 billion

Joined club: 2008

10. Attock Petroleum

Revenues: $1.72 billion

Joined club: 2010

11. Lahore Electric Supply Company

Revenues: $1.49 billion

Joined club: 2006

12. Pakistan Refinery

Revenues: $1.44 billion

Joined club: 2011

13. Sui Southern Gas Company

Revenues: $1.38 billion

Joined club: 2005

14. Pakistan International Airlines

Revenues: $1.36 billion

Joined club: 2005

15. Engro Corporation

Revenues: $1.29 billion

Joined club: 2011

16. Pakistan Telecommunications Company

Revenues: $1.25 billion

Joined club: 2000

17. Kot Addu Power Company

Revenues: $1.14 billion

Joined club: 2012

18. Mobilink

Revenues: $1.11 billion

Joined club: 2006

19. Pakistan Petroleum

Revenues: $1.09 billion

Joined club: 2012


Riaz Haq said...

Here's PakObserver on US support for entrepreneurship in Pakistan:

Friday, January 11, 2013 - Islamabad—US Ambassador Richard Olson affirmed that the United States will continue to support the development of Pakistan’s entrepreneurs, including through the U.S. Ambassador’s Fund, during a visit to the National University of Sciences and Technology’s (NUST) Technology Incubation Center on Thursday.

“We all know that societies thrive when their people have ample opportunity, and this is why the United States supports young entrepreneurs in Pakistan,” said Ambassador Olson during a tour of NUST’s state-of-the-art Technology Incubation Center.

While at NUST, Ambassador Olson announced that the U.S. Ambassador’s Fund, which supports small-scale, high-impact programs for communities throughout Pakistan, will now also focus on support to Pakistan’s entrepreneurs. The U.S. Embassy also recently unveiled an entrepreneurship program called Khushhali Ka Safar (Journey to Prosperity), which provides support to innovative Pakistani entrepreneurs by connecting them with American investors and mentors, particularly from the Pakistani-American diaspora and academic institutions.

Ambassador Olson highlighted NUST’s future Center for Advanced Studies, which will focus on Pakistan’s energy needs, and is being established together by the Governments of Pakistan and the United States. Three Centers will eventually be established across the country. “These Centers, a five-year, $127 million program funded by the U.S. Agency for International Development, will promote the development of Pakistan’s water, energy, and agriculture sectors through applied research, training, university linkages, and contributions towards policy formation. We look forward to promoting entrepreneurship and innovation through the strong links each center will have with the private sector,” said the Ambassador.

In addition, the United States recently launched the multi-year Pakistan Private Investment Initiative. Drawing on public-private partnerships, this initiative will spur job growth and economic development by expanding access to capital for Pakistan’s small- to medium-sized companies.Another U.S. program, the Pakistan Firms Project, helps to increase the profitability and incomes of small and medium-sized businesses in vulnerable areas by identifying and removing constraints to private-sector job growth in key areas such as agriculture, livestock, minerals, and tourism.

Riaz Haq said...

Here's Daily Times on US-Pak cooperation in human capital development:

* Grant to help researchers turn their research into commercially viable projects with private sector partners

* Symposium on ‘Economic Growth through Technology Transfer’ kicks off

ISLAMABAD: US Ambassador Richard Olson has announced new funding for Pakistani researchers during the first Pakistan-US Science and Technology Cooperation Programme Symposium on “Economic Growth through Technology Transfer”, which started at the National University of Sciences and Technology (NUST) on Thursday.

The two-day symposium is being jointly organised by the Higher Education Commission (HEC), Ministry of Science and Technology (MOST), US Department of State, US Agency for International Development and US National Academy of Sciences. The main objective of this academic activity was to introduce concepts of technology transfer and foster new interactions between research projects and the private sector, enhancing translation of research across these domains.

The participants included principal investigators, private sector, government representatives and universities. Delivering the keynote address, Ambassador Olson said that international science and technology cooperation is essential in addressing global challenges. Examples of research cooperation that can improve lives include more efficient water treatment to conserve and reuse wastewater; systems that rapidly detect deadly, drug-resistant tuberculosis; and solar water-heating systems for remote, rural areas, he said.

Ambassador Olson explained several other ways that the United States promotes scientific cooperation with Pakistan. He also announced new funding for Pakistani researchers to turn their research into commercially viable projects with private sector partners. This year’s Pakistan-US Science and Technology Symposium mark the 10-year anniversary of the Pakistan-US Science and Technology Cooperation Agreement and highlights a new focus on economic growth through scientific cooperation.

The two-day symposium brings together American and Pakistani researchers, universities, research institutions, government officials, and entrepreneurs to help build partnerships between researchers and private sector. The sessions include hands-on workshops on establishing private sector partnerships, intellectual property, and how to “sell” a business idea to potential investors. Earlier in the inauguration session, HEC Member Dr Nasser Ali Khan informed that over the last decade, the United States and Pakistan have jointly contributed $38 million to fund 73 Pakistani-US scientist-led research projects among 40 different institutes and universities in both countries. He also shed light over the decade-long achievements of higher education sector.

The Pakistan-US Science and Technology Cooperation Programme will sponsor two competitive seed grant programmes in 2013: “Innovate! and Collaborate”. Under these programmes, researchers can apply for seed grants of up to $15,000 starting in summer 2013. Application details will be available in summer 2013. HEC chairperson Dr Javaid R Laghari, Ministry of Science and Technology Secretary Akhlaq Ahmad Tarar, National University of Science and Technology Islamabad Rector Engr Muhammad Asghar and University of Agriculture Faisalabad Vice Chancellor Prof Dr Iqrar Ahmad Khan were also present on the occasion.\02\01\story_1-2-2013_pg11_1

Riaz Haq said...

Here's a PakistanToday report of a Silicon-Valley based Pakistani-American VC Faysal Suhail's Pak visit:

ISLAMABAD - Pakistan has great opportunity to tap the true potential of Venture Capital for job creation and acceleration of economic growth on sustainable grounds. “Pakistan is having potential as well as talent to promote venture capital to strengthen its economy,” Faysal Sohail, Managing Director of CMEA Capital in San Francisco USA told APP in an interview.
The American experts was accompanied by Matthew Boland, Deputy Press Officer-Deputy Spokesman of US Embassy in Islamabad and Ambassador Shahid Kamal and Advisor Science, Technology and Innovation Organization (STIO).
It is pertinent to mention here that Faysal Sohail is currently visiting Pakistan to explore venture capital potential in various fields of economy with special focus on energy sector.
He was of the view that although venture capital was a new idea for Pakistan but it has the potential to boost the country’s economy by utilizing the vast talent of its young generation.
He said that complying with Islamic ideology, Venture Capital is risk-based capital for entrepreneurship with prospects of good returns on investments.
Faysal Sohail said the venture capital sector was investment-friendly as risk was shared by both investor and owner of the project. It provides an opportunity of sharing capital and skills through a mutual venture, he added. Replying to a question, Faysal said in Pakistan the energy sectors, including solar and other alternative energies, web, software and commerce, including e-commerce, and third generation mobile technologies were the major sectors which could boost national economy and create job opportunities.
He said during the last 20 years, 100 per cent new jobs created in the United States were through venture capital, so this sector had great potential for Pakistan also.
“Venture capital is like life-blood for various companies”, he remarked.
Replying to another question, he said Pakistan and the United States have a lot of potential for collaboration in the field of venture capital and in this regard Pak-US Business Council and United States Agency for International Development (USAID) could play an important role.
The venture capital expert stressed the need for highlighting the new idea of venture capital in Pakistan so that people as well as the entrepreneurs take optimum benefit of the important sector.
“Since the economic growth is driven by small and medium size enterprises, the venture capital can play an important role to boost the economy on sustainable grounds,” he added.

Riaz Haq said...

Here's a Gulf News report on new tech training center in FATA's Bajaur agency in Pakistan:

Islamabad: In keeping with the directives of President His Highness Shaikh Khalifa Bin Zayed Al Nahyan to provide assistance to the people of Pakistan and to support technical and vocational educational there, the UAE Project to Assist Pakistan (UPAP) has announced completion of the project to build a technical college at Bajaur in Pakistan at a total cost of $3.4 million (Dh12.4 million). The project was delivered to the local government in Bajaur following completion.

The official inauguration of the college was attended by Chief of Pakistan Army Staff General Ashfaq Pervez Kayani, UAE Ambassador to Pakistan Eisa Abdullah Al Basha Al Nuaimi, Abdullah Khalifa Al Gafli, Director of the UPAP, and senior Pakistani officials.

The college is built on a 34,000 square foot area. It will provide diploma-level technical education for up to 450 students in various disciplines of engineering such as electrical, mechanical, civil and mining.

Riaz Haq said...

Here's a Dawn report on Startup Grind launch in Karachi:

Originally founded in California, Startup Grind is an international community with a global presence in more than 40 cities and 20 countries.

Its mission is dedicated to celebrate the success stories of founders and innovators of business startups and encourage entrepreneurship.

The monthly interviews and startup mixers provide a great opportunity to entrepreneurs-in-making to network with ambitious people and benefit from the ‘pearls of wisdom’.

The official launch in Pakistan took place on Friday, the 3rd of May at T2F (The Second Floor).

It was hosted by Mr. Fawaad Saleem, the Chapter Director for Startup Grind and chaired Mr. Farzal Ali Dojki as the guest of honour. Mr. Farzal is the CEO of Next Generation Innovations, a consulting company that specializes in customized IT solutions and often partners with startup businesses to support their launch and operations.

The event started off with tea and networking as professionals across different spectrums of the industry engaged in meaningful networking. Before the interview began, Mr. Farzal gathered the prime issues that plagued the audience’s minds regarding startups.

The concerns focused on lack of funding opportunities, successful team-building, and making the choice between entrepreneurship and employment in the early stages of one’s career.

He concluded his talk with three lessons.

Firstly, as a startup you need to work hard and with dedication.

Secondly, it is important to hire carefully and ‘fall in love’ with the people you are hiring.

Thirdly, in order to launch a startup, it is important to work in a startup first. The learning curve of working in a successful small team is extremely high. One gets the opportunity to engage directly with the customers, take decisions, and explore areas of growth.

Riaz Haq said...

Here's a ET report on USAID helping lunch a private equity fund in Pakistan:

The United States and the government of Pakistan hosted the ‘US-Pakistan Business Opportunities Conference’ in Dubai, where USAID in association with the Abraaj Group and JS Private Equity Management (JSPE) announced the creation of the ‘Pakistan Private Investment Initiative’ which will launch two new private equity funds focused solely on Pakistan’s dynamic and fast-growing small- and medium-sized businesses.
USAID Administrator Dr Rajiv Shah announced that USAID will provide a seed investment to capitalise the funds which will be matched by Abraaj Group and JSPE with investments of their own, as well as private funds raised from other limited investors.
“We are seeding individual funds with $24 million each. The Abraaj Group and JSPE will match or exceed our commitment. We fully expect them to exceed that contribution,” said Dr Rajiv Shah. “Pooled funds will initially be $100 million which we expect will grow many fold into hundreds of millions of dollars in investment for small and medium businesses.”
The announcement came at the end of the first day of the conference. “By partnering with Abraaj and JS Private Equity Management, USAID capitalises on these companies’ expertise to make smart investment decisions that will grow the Pakistani economy, create jobs, and generate profits for investors who seize the economic opportunities that Pakistan presents,” Shah said.
Speaking at the conference US Ambassador Richard Olson said, “The United States is one of the largest investors in Pakistan, and the US government supports Pakistani business leaders by offering access to finance, facilitating business deals, and strengthening business education.”
“With 190 million potential customers, Pakistan is a huge emerging market opportunity for US companies,” Ambassador Olson observed.
The conference, sponsored by the US government, was attended by 200 American, Pakistani and Emirati businesses including Gillette, Citibank, General Electric, Procter and Gamble, Abraaj Group, Big Bird Group, Coca-Cola, Conoco Phillips, Engro, Estee Lauder, Goldman Sachs, IBM, Monsanto, Nishat Group, and the Saif Group.

Riaz Haq said...

Here's an Express Tribune report on a new private equity fund in Pakistan:

Private equity is poised to take off in Pakistan, with contrarian investors betting that the country is endowed with far greater potential than news reports chronicling Taliban bombings, the war in neighbouring Afghanistan or an evolving democracy’s frequent bouts of political drama might imply.
While Pakistan is undoubtedly a high risk play, investor sentiment has improved following a smooth transition at general elections in May and pledges by the new government of Prime Minister Nawaz Sharif to tackle a stubborn power crisis that has stifled manufacturing.
“I feel like being a kid in a candy store,” said Shaharyar Ahmed, 32, who started his career as an equity researcher at Goldman Sachs in New York, but who returned to his native Pakistan last year. “So many companies, amazing returns, growing in leaps and bounds – it’s a buyers’ market.”

Ahmed and his collaborator Isfandiyar Shaheen, 30, are at the vanguard. As co-managers of Cyan Capital, a $50 million private equity fund set up by the Dawood Hercules Group, one of Pakistan’s biggest conglomerates, they must prove that they can find finance-starved companies ready for rapid expansion.
But the risk-hungry duo have now forsaken budding careers in the United States financial industry in the belief that somewhere in Pakistan’s ranks of unglamorous, overlooked family businesses lie hidden the seeds of future corporate giants.
“There’s a new wave of interest in private equity,” said Chairman of JS Private Equity Ali Jehangir Siddiqui while talking to Reuters. “There are certainly some funds that are stepping up to the plate, we hope that there will be more.”
Wild west
The new funds all aim to introduce the private equity model that is now familiar in rich and poor countries alike: groups of investors buy stakes in privately owned companies in return for a say in how they are run.
The theory is that an injection of capital and management savvy will turbo-charge the best of Pakistan’s family-run enterprises, creating jobs for a restive, youthful population and lucrative returns for the funds when they sell their stakes.
“It doesn’t take a rocket scientist to figure out how much you can do in this country, it’s absolutely green,” said Cyan’s Shaheen, a Pakistani who began his career in US investment banking but now lives in Karachi. “It’s like the Wild West.”
Cyan’s confidence in Pakistan’s prospects stems in part from the sheer size of the market in a country of 180 million people, where many conservatively run companies have shied away from scaling up their businesses into nationwide operations.
Companies listed on the Karachi Stock Exchange have grown their profits by at least 13-15% annually since 2009, according to one market analyst. With 49% returns in 2012, the market was among the world’s top performers....

Riaz Haq said...

Here's an APP report on US helping promote entrepreneurship in Pakistan:

ISLAMABAD, Nov 17 (APP): The United States is ready to cooperate with Pakistan for entrepreneurship development in the country to put it on the path of sustainable economic growth, said Advisor to US President on Entrepreneurship and Founding Managing Director of MIT Entrepreneurship Center Ken Morse on Sunday. “Entrepreneurship offers best option to Pakistan for engaging its youth in productive activities and to create more jobs,” he said while addressing the business community here.
He said Pakistan should celebrate entrepreneurship day to create awareness in society and motivate its youth for becoming entrepreneurs.
He was of the view that Pakistan should focus on encouraging its youth towards entrepreneurship to help them have respectable jobs and help promote economic growth.
Ken Morse is member of a delegation visiting Pakistan. The other delegation members include Jason Pontin Editor in Chief MIT Technology Review, Ms. Deirdre Coyle Co CEO of All World Network.
The delegation members along with Azhar Rizvi Chairman FPCCI Standing Committee on Innovation visited Islamabad Chamber of Commerce and Industry to discuss the importance of entrepreneurship development for Pakistan.
Morse said 65 per cent of small hotels and single person stores in the US were owned by South Asians, which showed that they had great potential for this profession.
Speaking on the occasion, ICCI President Shaban Khalid briefed the delegation about the ICCI activities for entrepreneurship and youth development.
He said ICCI had formed a Young Entrepreneurs Forum (YEF) to focus on encouraging youth towards entrepreneurship adding YEF organizes workshops, trainings and mentorship programs for youth development as well as promotes the networking of young entrepreneurs at local and international level.
The YEF recently organized an Indo-Pak Young Entrepreneurs Bilateral at Islamabad to promote linkages in youth of both countries, he said adding both the sides signed a joint statement which also declared to establish a Peace University to promote people-to-people relations between the two countries.
Jason Pontin, Editor in Chief of MIT Technology Review, said entrepreneurship had been identified as one of the most important vehicles for economic wellbeing of individuals and communities and added that MIT Enterprise Forum Pakistan (MITEFP) had been established to develop an entrepreneurial eco-system in the country.
He was of the view that fostering entrepreneurship in Pakistan would create greater employment, growth and competitiveness in the country and engage youth in economic activities.
He said,” We are planning to start MIT Technology Review in Pakistan and its publication will highlight Pakistani entrepreneurs’ success stories at international level giving them an international exposure.”
Ms Deirdre Coyle Co, Chief Executive Officer of All World Network, said Pakistan had great potential for entrepreneurship and “we are trying to put Pakistani companies on global stage by announcing the ranking of 100 fastest growing companies of Pakistan.”
This would help Pakistani companies to get international recognition and we want to show the world that Pakistan is very much open to business and help change perception about it, she added.
She hoped that joining the All World ranking, Pakistani companies would get global visibility, attract new customers, investors and talent all over the world and become part of a prestigious group of successful entrepreneurs.

Riaz Haq said...

Here's an Express Tribune report on youth business loans in Pakistan:

With his new financing scheme for the youth, Prime Minister Nawaz Sharif on Saturday unveiled a plan to enable budding entrepreneurs to run their business ventures.
The Youth Business Loans initiative is the government’s delivery of a promise made during the election campaign. “During the election campaign, I witnessed the vigour and enthusiasm that the youth showed, and promised that if voted to power, the PML-N would empower the youth of Pakistan so they can contribute effectively towards the development of the country,” he said at the launch of the scheme.
The chairperson of the prime minister’s Youth Business Loans scheme, Maryam Nawaz, said the aim was to convert young ‘dependents’ into ‘providers’.
The scheme is designed to provide subsidised financing at eight percent mark-up per annum for 100,000 beneficiaries through National Bank of Pakistan and First Women Bank.
The total mark up rate would be 15 per cent but the government would pay the remaining seven percent on behalf of the applicants.
Those falling in the age group of 21 and 45 years are eligible to apply for loans from Rs100,000 to Rs2,000,000.
Small business loans with a tenure of up to seven years plus one-year grace period and a debt-equity ratio of 90:10 will be disbursed across the country including Gilgit-Baltistan‚ Azad Jammu and Kashmir and the Federally Administered Tribal Areas.
Youth will have an eight-year payback period with the first year as a grace period for repayment.

Riaz Haq said...

Farrukh H Khan is the Country Director & CEO of Acumen Pakistan and one of the leading independent business and financial advisors in the country. With over 25 years of senior management and board level experience, Farrukh is the founding partner and former CEO of BMA Capital Management Limited. Under his stewardship, BMA established itself as the leading investment banking group in Pakistan and received several international awards, including the 2010 Euromoney award for the best investment bank in Pakistan.

He has worked on many landmark transactions, including advising the Privatisation Commission on the US $813 million GDR offering of Oil and Gas Development Company Limited (OGDCL), which was listed on the London Stock Exchange, and successfully advising Etisalat on their $2.6 billion acquisition of PTCL, the largest M&A and foreign direct investment in the history of Pakistan. He has a deep understanding of business and investment environment in Pakistan and has worked with the senior most levels in companies and governments. He also has an excellent network and knowledge of business in the Middle East and South Asia
BR Research: Please give a brief description about Acumen.

Farrukh H Khan: Acumen began investing in Pakistan in 2002, and pioneered the idea of investing for social impact, which essentially means that we invest in businesses that serve the poor. Acumen itself in not for profit, so any return that we make gets reinvested for such ventures.

It is a new way of harnessing philanthropic capital. We do not give out grants or donations but encourage entrepreneurs in six key areas that we focus in: housing, education, health, water and sanitation, alternative energy, agriculture and financial services. We have pioneered the idea of using philanthropic capital to create and encourage sustainable models of development rather than donor driven models. One can also witness here in Pakistan that donor driven models do not suffice to address local issues of development.

This model does not replace traditional philanthropy and charity but we recognise that the poor can be helped with dignity and through sustainable models that are not donor driven. It requires a certain degree of patience because we also understand that establishing a pro-poor business can be time consuming. In our experience, anything between five to seven years is needed until such businesses become s..

BRR: How much is your work force in Pakistan?

FHK: We have a workforce of about 14-15 people in Pakistan. We work across all Pakistan while our main office is in Karachi and another office in Lahore.

BRR: Can you please tell something about the Acumen Fellowship program?

FHK: It is a one year full time programme. There were about 1200 applicants from 10 different countries last year. Fellows spend the first 3-4 months in New York going through a world class training programme. And the remaining nine months are spent with one of our portfolio companies on the ground. To scale up this programme we started regional programmes in different countries.

Under these regional programmes, the training is the same but the structure is more like that of an executive MBA. So the fellows continue with their current jobs and get together at intervals of 5-6 weeks over the course of a year to go through the training module.

This year, for 20 fellowships we got about 1000 applications. Our fellows come from diverse backgrounds and from across the country. The idea is that change should be indigenous and should be led by local people. The fellows should be involved in some social sector work and should also have a strong commitment to bring about progressive change.

Riaz Haq said...

Pakistan’s 2nd Annual Start-Up Cup competition launched

To promote and assist the local entrepreneurships across the country, the 2015 Pakistan Start-Up Cup, an intensive, nationwide business competition launched here on Saturday.

The Start-Up Cup is locally driven business model competition open to any idea. This innovative community-based approach is designed to increase the quality and quality of entrepreneurs in the community.
The US Embassy in Islamabad and the Islamabad Indus Entrepreneurs (TiE) Chapter, in collaboration with the US Pakistan Women’s Council, launched the 2015 Pakistan Start-Up Cup, an intensive, nationwide business competition. Entrepreneurs selected to participate in Start-Up Cup will receive coaching through multi-day “Build-a-Business” workshops and regular mentoring to help turn their ideas into a commercial reality. Prize money of $10,000, $7,500, and $5,000 will be awarded to the winner and two runners-ups with the best Start Up concept.
At the opening ceremony, Deputy Chief of Mission of the US Embassy in Islamabad Thomas E Williams, said, “Programs like Start Up Cup foster greater inclusiveness in Pakistan’s economy, particularly for women. The entrepreneurial solutions that arise from competitions such as Start-Up Cup foster inclusiveness, grow economies, promote stability, expand the international supply chain, and spread the exchange of ideas.”
Over the course of the seven-month programe, aspiring Pakistani entrepreneurs will learn to design viable business models, develop customers, and launch their start-up business concepts in the marketplace.
This year’s programme will build on the success of last year’s Start-Up Cup, which saw over 400 entrepreneurs compete for one of the top three prizes. Last year’s winning team went on to defeat 170 other entrepreneurs to win the first-ever World Start-Up Cup competition in Yerevan, Armenia.
The 2015 Start-Up Cup in Pakistan will introduce new partnerships with entrepreneurship centres across Pakistan, including the world’s first Women’s Entrepreneurial Centre of resources, education, access, and training for Economic Empowerment (WECREATE) in Islamabad sponsored by the US Department of State in collaboration with the US Pakistan Women’s Council; the Lahore University for Management Science (LUMS) Centre for Entrepreneurship; and Karachi-based technology incubator “The Nest I/O.”
The partnerships between Start-Up Cup and these centres will ensure that newly established businesses receive sustained support and mentoring, essential tools for long-term success. Numerous US Embassy programmes assist Pakistan’s entrepreneurs by increasing their access to financial resources, supporting opportunities for entrepreneurship education, and nurturing an entrepreneurial culture.
There are four base stations for this program, Islamabad, Lahore, Peshawar and Karachi with overall prize money of Rs22.5 million.
During the opening ceremony esteemed businessman and Islamabad TiE Board member Imtiaz Rastgar said, “StartUp Cup has only came to Pakistan two years ago and already tremendous feats have been achieved as new voices and ingenious minds have been brought to the fore. One can only imagine how much advantage this competition will bring as the years progress”.

Riaz Haq said...

Small is beautiful - unless you are a business that wants to grow. In which case, small is not so appealing. In Pakistan, where 90 percent of businesses are small or medium, challenges to scaling-up businesses have kept the private sector from realizing their full potential and contributing as much as they could to the economy. To help address a major constraint to the growth of small and medium enterprises (SMEs) in Pakistan, the U.S. Agency for International Development (USAID) is partnering with local banks to boost lending to SMEs. The new $60 million "U.S.-Pakistan Partnership for Access to Credit" was launched at last week's U.S.-Pakistan Business Opportunities Conference, as part of a larger bilateral government effort to boost trade and investment in Pakistan.

Finance is an important enabler of economic growth anywhere in the world. For Pakistan, which needs annual economic growth of at least 7 percent just to keep up with the number of youth expected to enter the labor market each year, this financing is important not only for the economy but for stability. Yet the private sector credit to gross domestic product (GDP) and financial depth ratios in Pakistan trail behind leading emerging economies.

In the SME segment, the volume of lending and types of financing tailored to SME needs have been very limited. A World Bank study found that only 16 percent of total credit in Pakistan went to SMEs. Moreover, about 70 percent of SME borrowing was used for working capital while only about 12 percent went toward long-term investment. Another survey shows only 11 percent of micro, small, and medium enterprises (MSMEs) in Pakistan report having access to finance, below the 15 percent international average and well below percentages reported in higher performing middle-income countries like Brazil and Turkey (30 and 48 percent respectively).

Despite these limitations, SMEs make an out-sized contribution to Pakistan's economy. The same World Bank study found that SMEs in Pakistan employ nearly 70 percent of workers in the manufacturing, services, and trade sectors and generate an estimated 35 percent of manufacturing's value addition. They also contribute over 30 percent of GDP and more than 25 percent of export earnings. Thus, alleviating a key constraint to their growth could lead to substantial increases in the number of jobs for Pakistan's large number of youth and greater income generation.

The new Partnership reflects a shared commitment to promote broad-based economic growth in Pakistan. Private sector investment was identified as an essential ingredient for growth in the Government of Pakistan's Vision 2025 strategy. The Partnership is part of a larger umbrella of U.S. support to SMEs in Pakistan to help them grow and expand into new markets. It will provide partner banks- Bank Alfalah, JS Bank, Khushhali Bank and First Microfinance Bank- with a loan portfolio guarantee through USAID's Development Credit Authority (DCA). The guarantee will lower the risk to the banks for lending in sectors they would otherwise perceive as being too risky. It will also encourage partner banks to extend longer-term loans and introduce credit products that address the needs of SMEs.

With more access to finance, small and medium businesses are poised to make even larger contributions to the Pakistan economy than they do now. The new U.S.-Pakistan Partnership for Access to Credit will make it possible for dynamic SMEs to be more than small and beautiful. After all, beauty is in the eye of the beholder and for businesses eyeing scale-up, there are few things more attractive than being able to grow.

Riaz Haq said...

Private equity firms Abraaj and JS Private Equity Management have teamed up with the US Agency for International Development (USAID) to launch two private private funds focused on Pakistan.

The two funds launched under the Pakistan Private Investment Initiative will invest in Pakistani SMEs. USAID will provide a seed investment of $24m for each of the two funds, which will be matched or exceeded by Abraaj and JS.

USAID said it “fully expected” the firms to exceed that contribution.

USAID administrator Rajiv Shah said, “Pooled funds will initially be $100m which we expect will grow many fold into hundreds of millions of dollars in investment for small and medium businesses.”

Pooled funds will initially be $100 million which we expect will grow many fold into hundreds of millions of dollars in investment for small and medium businesses

Abraaj Group CEO Arif Naqvi said, “As one of the most experienced investors in growth markets, we are pleased to partner with USAID on this initiative and help bring greater opportunities to small and mid-cap businesses in Pakistan.”

The Pakistan Private Investment Initiative is expected to “demonstrate that investing in growth-focused enterprises can generate real profits for investors,” USAID and the firms said in the statement.

Earlier this month Abraaj bought West Africa-focused dairy products and juices maker Fan Milk International (FMI), bringing its total African investments to $2.2bn across sixty nine companies.

Riaz Haq said...

A perennial outsider, Naqvi was born in Pakistan and built his career in the Middle East, no easy feat in a region where Arab prejudice against Pakistanis is common. The fourth child of a plastics manufacturer in Karachi, Naqvi graduated from the London School of Economics. After four years at Arthur Andersen and a short stint at a Saudi conglomerate, he used $50,000 in savings to start an investment advisory firm, Cupola, in Dubai in 1994. In his first deal he raised $8 million for a duty-free-kiosk business and received an $800,000 advisory fee. Five years later, in 1999, he pulled off a complex deal that involved purchasing another business-services company, Inchcape Middle East, for $102 million, with $4.1 million in equity. Naqvi then sold off pieces of the company for a total of $173 million. With the proceeds of that transaction he founded Abraaj in Dubai in 2002.


In summer 2012 Abraaj acquired London-based Aureos Capital, which gave it a global network of offices. Now the combined company does deals in the range of $20 million to $100 million. It has majority stakes in nearly half its portfolio companies, such as the Colombia-based D1 supermarket chain, which grew from 18 stores in 2010 to more than 280 today; Ghana-based ice cream maker Fan Milk International, a coinvestment with Paris’ Danone; and Pakistan’s Karachi Electric Supply, into which Abraaj invested $360 million in 2008.

Arif Naqvi, chief executive of Dubai’s Abraaj Group, hates the way Westerners speak about his part of the world. His private equity firm, he says, does not operate in emerging markets or, worse, frontier markets.

“We have taken the risk out of investing in what the West mistakenly calls ‘emerging markets,’ ” he says in elegant, Pakistani-accented English from a Madison Avenue outpost. “ They’re growth markets,” he insists.

While his remarks contain a healthy dose of marketing, Naqvi has a point. His $9 billion private equity firm–currently the largest investor in emerging markets outside of Brazil, Russia, India and China–has a track record many developed-world money managers would kill for. Despite operating in places where the rule of law often comes into question, limited partners report an impressive 17% annual return since inception in 2002.

Naqvi, 55, considers the notion of risky emerging markets a myth–part of what he calls “universally practiced hypocrisies.” He reminds a visitor that in 2008 the biggest risk on the planet came not from the developing world but from the financial capital of the modern era, New York City. Why, he asks pointedly, “have you not attached a risk premium to doing business with Wall Street banks?”

In a clubby world of global dealmakers, Blackstone, KKR and Carlyle get most of the headlines, but Abraaj is the undisputed private equity king of investing in the seemingly dangerous markets of Asia, Africa and Latin America. There is no shortage of big investors wanting to get into its newest funds. So far in 2015 the firm has sucked in $1.4 billion in fresh capital, giving Abraaj the largest pool of institutional money now pointed at sub-Saharan Africa in the world.

The firm currently has 300 limited partners, including the Gates and Skoll foundations, the World Bank’s International Finance Corporation (IFC) and the European Investment Bank.

“I view them as having more depth and breadth [in emerging markets] than the bigger players,” says Jin-Yong Cai, CEO of the IFC, which has invested $200 million in Abraaj funds and $70 million directly with Abraaj in deals, including an electric company in Karachi and a home loans company in Ghana.

Riaz Haq said...

#Microsoft launches http://Rozgar.Work , #Employability & #Entrepreneurship Platform for #Pakistan. #skillsgap

Microsoft has launched the first of its kind Employability and Entrepreneurship Platform, Rozgar.Work, in Pakistan, in collaboration with World Vision-Pakistan (via ProPakistani). The platform offers job-seekers with end-to-end career guidance, up skilling, job-matching and mentorship to address the ever growing issue of unemployment and underemployment. The new platform is powered by Microsoft Windows Azure Cloud, SQL, and SharePoint 2013.

The event was attended by Federal Minister for Planning and Development Ahsan Iqbal as the chief guest, as well as Microsoft and World Vision executives.

Microsoft Pakistan’s General Manager Nadeem Malik said,

At Microsoft we believe in sharing our success with the communities, wherever we operate. Rozgar.Work is a robust platform which can enable revolutionary enrichments in the society, by empowering the youth, to find effective solutions for the various challenges faced by the society.

Entrepreneurship and skill-development are the solution to many of Pakistan’s economic issues. Microsoft is committed to create fresh opportunities for the youth, to play a key role in nation-building. We appreciate the valuable support from WVI-Pakistan to make this program successful.

Program Development Manager at WVI -Pakistan Rizwan ul Haq said,

We are really excited to be a part of this pioneering initiative with Microsoft. World Vision is an international humanitarian organization that works for poverty alleviation,

Social Development, Disaster-Relief, Education, Healthcare and Justice for the deprived segments. We would like to thank the leading enterprises like TIE, PASHA, that have joined today’s event to show their support for this initiative.

Career counselling is a big task, and if you don’t do your proper research, you may end up in a field which is not fit for you in the long run. With Rozgar.Work, job seekers can get in touch with people who are well informed about the careers and can help new graduates make the right choice. Additionally, the platform also boasts an Online & Mobile Job-Matching & Search-functionality allowing job seekers to search for the best possible job opportunities available.

The platform also has online courses to learn from, as well as online and offline training options for different skills, and to earn a diploma.

Riaz Haq said...

#SaudiArabia, #Japan's #SoftBank plan $100 billion #technology fund ─ one of the world's biggest. #VentureCapital

Saudi Arabia and Japan's SoftBank Group (9984.T) said they will create a technology investment fund that could grow as large as $100 billion, aiming to create one of the world's largest private equity funds.

The plan is part of a series of dramatic business initiatives launched by Riyadh this year as Saudi Arabia, its economy hurt by low oil prices, deploys huge financial reserves in an effort to move into non-oil industries.

SoftBank's founder and chairman Masayoshi Son, who has built his company into a $68bn telecommunications and tech investment behemoth from a $50,000 start-up, has been seeking to expand in new areas.

The Public Investment Fund (PIF), Saudi Arabia's top sovereign wealth fund, is set to be the lead investment partner and may invest up to $45bn over the next five years while SoftBank expects to invest at least $25bn, the Japanese company said in a statement.

Several other large investors are in talks on their possible participation and could bring the total size of the new fund up to $100bn. The investors were not identified.

"With the establishment of the SoftBank Vision Fund, we will be able to step up investments in technology companies globally. Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector," SoftBank Chairman Masayoshi Son said.

The fund would be managed in Britain by a subsidiary of SoftBank.

Investment power
Saudi Arabia's Deputy Crown Prince Mohammed bin Salman, leading an economic reform drive in the kingdom, has revealed a string of high-profile investment plans this year.

He has said he aims to expand the PIF, founded in 1971 to finance development projects in the kingdom and until this year little known abroad, from $160bn to about $2 trillion, making it the world's largest sovereign fund.

In June, the PIF departed from Saudi Arabia's traditional strategy of low-risk investments and took a step into the tech world by announcing the $3.5bn purchase of a stake in United States ride-hailing firm Uber.

The deal illustrated how Riyadh now hopes to use its investments to develop the economy: Uber is a popular form of transport for Saudi women, who are banned from driving, and is creating badly needed non-oil jobs for Saudi citizens.

SoftBank's tech and telecommunications portfolio ranges from U.S. carrier Sprint (S.N) to a stake in Chinese e-commerce giant Alibaba (BABA.N).

Its $32bn purchase of British company ARM in July established its first major presence in chip making, driven by expectations for a shift to the so-called "internet of things" – networks of connected devices, vehicles and sensors.

Son said earlier this year that he wanted to "cement SoftBank 2.0" by working on unconventional ideas.