Repatriation of profits and dividends from Pakistan rose by 12.2 percent during the first ten months of the current fiscal year. Foreign direct investors sent $735m abroad from July 2007 to April 2008, up from $654.9 million repatriated in the corresponding period last year, according to the figures released by the State Bank of Pakistan.
It is this policy of the Musharraf-Aziz era permitting repatriation of 100% of the profits that spurred a significant increase in foreign direct investment over the last several years. The investments in power, communication, oil and gas have led the pack in profits repatriated recently.
Thermal power generation companies sent $151.27 million, the most by any sector of economy. This represents 27.9 percent increase over $118.32 million sent last year.
It was followed by the telecommunications sector, which sent $92.06 million during July-April period. It is a drop of 14.3 percent from $107.42 million remitted last year.
The oil and gas exploration companies transfered $64.56 million, up by 83.9 percent from $35.1 million last year.
Petroleum refining sector repatriated $51.7 million compared to $48.69 million sent abroad last year.
Repatriation of profits by companies making pharmaceuticals & OTC products declined from $48.22 million to $26.31 million. Tobacco and cigarettes sector sent abroad $27.28 million as compared to $17.6 million last year.
Chemical manufacturing companies' profit repatriation declined from $42.74 million to $39.4 million. The repatriation of profit by financial sector fell from $92.12 million to $90.64 million.
Many sectors showed a significant decline in profits repatriation. The SBP statistics show no profits repatriated from paper & pulp, mining & quarrying and construction so far this fiscal year. Repatriation by foreign investors registered an increase of 59 percent to 804.2 million dollars during FY07 as compared to 504 million dollars sent abroad during FY06.
Foreign direct investments and the ability to repatriate profits have been the key to the phenomenal economic growth and dramatic poverty reduction in China. What has differentiated China's success from India's has been China's ability to attract vast amounts of FDI. Pakistan must follow the Chinese example to achieve similar results.While it may create major disparities between the rich and the poor in the short term, it is the only to ensure continuing poverty reduction and makes all boats rise with massive job creation. Please see earlier blog post on this subject.
There are some Pakistani economists who are advocating limiting profits repatriation by foreign investors. It may help reduce the loss of foreign exchange reserves temporarily. However, such a move will deter further FDI investments and hurt Pakistan's economic development, job growth and poverty reduction over the long run.
Showing posts with label Foreign Direct Investment. Show all posts
Showing posts with label Foreign Direct Investment. Show all posts
Friday, June 6, 2008
Saturday, January 26, 2008
Pakistan: A Magnet For Foreign Investors?
Extreme Investing or Safe Haven?
Some call it "Extreme Investing". Call it by any name, but international investors have discovered Pakistan as an attractive destination.
Referring to the recent upsurge in violence, Bank Muscat CEO Ali Issa said, "We are not worried about our investment in Pakistan, we think it's just a passing phase."
Chief Strategist for Merrill Lynch Mark Matthews is the most bullish about Pakistan, calling it a “safe haven” for investors. Matthews believes Benazir Bhutto's death is "on the whole, largely irrelevant to the economy, which like other places, is what really moves the stock market." He says Pakistan represents the “biggest information arbitrage,” which in its crudest terms, means that body bags are good for stock pickers. He reckons that the slew of bad news from Pakistan is diverting people’s attention from the fact that the Pakistan economy is humming along nicely, with growth forecast to reach 7% this year, a repeat of 2007, and stocks yielding an average of 6% dividend yield. Karachi was up an impressive 40% last year, and would have closed even higher had it not been for the tragic assassination of former Prime Minister Benazir Bhutto in December which trashed the market.
Pakistan’s Telecom Sector
Telecom sector is attracting the largest share of foreign direct investment in Pakistan. Foreign investors pumped in $364m into it during July-Sept 2007 quarter, according to the latest figures released by Pakistan Telecommunications Authority. The total FDI in Pakistan for this 3-month period was $962.5m.
The number of cellular subscribers in Pakistan has crossed 76m in Dec, 2007, from 500,000 in 2004. According to Business Recorder, Pakistan's financial daily, most forecasters believe that the upward trend will continue in the next 5 years because of the huge market potential, particularly in the rural areas where the build-out has yet to happen. Operators such as Wateen (with Motorola) are planning a large Wimax roll-out to improve voice and high bandwidth data access across the country. The biggest mobile operators in Pakistan include Mobilink with 30m subscribers, Ufone with 16m, Telenor with 14m, Warid with 13m and Paktel with 1m. It is estimated that the telecom sector has added at least 300,000 jobs in the last few years.
Financial Services & Infrastructure
While Telecom has been the hottest sector, here are some of the recent deals making the news:
1. Nomura announced it would team up with an Omani bank to buy Saudi Pak Bank for US$200m.
2. Barclay’s Bank received a banking license in Pakistan and will open up 10 branches with US$100m.
3. International Petroleum Investment, a UAE company, announced it would build a US$5b refinery.
4. Hutchison Port Holdings announced it will build a US$1b deep water container port.
5. Singapore’s Temasek, through NIB Bank, is buying PICIC.
6. Philip Morris is building a new plant, and China Mobile is hiring thousands of people, as it doubles its base stations in the country.
Private Equity Funds
Recent launch of a private equity fund focused on Pakistan is another indication of continuing investor interest in Pakistan economy as a magnet for investors. This fund, solely dedicated to investing in Pakistan was closed December 2007, capping a year in which the country was one of the hottest emerging markets despite its political turmoil. This is the fourth or fifth major private equity fund focusing on Pakistan. JS Group, a Pakistani financial services group, is the sponsor and a large investor in this new JS Private Equity Fund, which was closed on Dec. 31 at $158 million.
The Future
While many Pakistanis seem to have a developed a sense of pessimism, even a hint of cynicism, the international investors are telling us that that there’s a bright future ahead for Pakistan. All we have to do is believe in it and not be swayed by all the bad news that media like to play up. A hopeful nation can do wonders, if the hope is backed up by sincere actions to realize that hope. The current continuing growth in the size and strength of the middle class in Pakistan, if continued for another decade, can do wonders in empowering the people and taking the power away from the small elite that has ruled Pakistan since its inception. Let’s be patient. Let’s not ever give up hope.
Some call it "Extreme Investing". Call it by any name, but international investors have discovered Pakistan as an attractive destination.
Referring to the recent upsurge in violence, Bank Muscat CEO Ali Issa said, "We are not worried about our investment in Pakistan, we think it's just a passing phase."
Chief Strategist for Merrill Lynch Mark Matthews is the most bullish about Pakistan, calling it a “safe haven” for investors. Matthews believes Benazir Bhutto's death is "on the whole, largely irrelevant to the economy, which like other places, is what really moves the stock market." He says Pakistan represents the “biggest information arbitrage,” which in its crudest terms, means that body bags are good for stock pickers. He reckons that the slew of bad news from Pakistan is diverting people’s attention from the fact that the Pakistan economy is humming along nicely, with growth forecast to reach 7% this year, a repeat of 2007, and stocks yielding an average of 6% dividend yield. Karachi was up an impressive 40% last year, and would have closed even higher had it not been for the tragic assassination of former Prime Minister Benazir Bhutto in December which trashed the market.
Pakistan’s Telecom Sector
Telecom sector is attracting the largest share of foreign direct investment in Pakistan. Foreign investors pumped in $364m into it during July-Sept 2007 quarter, according to the latest figures released by Pakistan Telecommunications Authority. The total FDI in Pakistan for this 3-month period was $962.5m.
The number of cellular subscribers in Pakistan has crossed 76m in Dec, 2007, from 500,000 in 2004. According to Business Recorder, Pakistan's financial daily, most forecasters believe that the upward trend will continue in the next 5 years because of the huge market potential, particularly in the rural areas where the build-out has yet to happen. Operators such as Wateen (with Motorola) are planning a large Wimax roll-out to improve voice and high bandwidth data access across the country. The biggest mobile operators in Pakistan include Mobilink with 30m subscribers, Ufone with 16m, Telenor with 14m, Warid with 13m and Paktel with 1m. It is estimated that the telecom sector has added at least 300,000 jobs in the last few years.
Financial Services & Infrastructure
While Telecom has been the hottest sector, here are some of the recent deals making the news:
1. Nomura announced it would team up with an Omani bank to buy Saudi Pak Bank for US$200m.
2. Barclay’s Bank received a banking license in Pakistan and will open up 10 branches with US$100m.
3. International Petroleum Investment, a UAE company, announced it would build a US$5b refinery.
4. Hutchison Port Holdings announced it will build a US$1b deep water container port.
5. Singapore’s Temasek, through NIB Bank, is buying PICIC.
6. Philip Morris is building a new plant, and China Mobile is hiring thousands of people, as it doubles its base stations in the country.
Private Equity Funds
Recent launch of a private equity fund focused on Pakistan is another indication of continuing investor interest in Pakistan economy as a magnet for investors. This fund, solely dedicated to investing in Pakistan was closed December 2007, capping a year in which the country was one of the hottest emerging markets despite its political turmoil. This is the fourth or fifth major private equity fund focusing on Pakistan. JS Group, a Pakistani financial services group, is the sponsor and a large investor in this new JS Private Equity Fund, which was closed on Dec. 31 at $158 million.
The Future
While many Pakistanis seem to have a developed a sense of pessimism, even a hint of cynicism, the international investors are telling us that that there’s a bright future ahead for Pakistan. All we have to do is believe in it and not be swayed by all the bad news that media like to play up. A hopeful nation can do wonders, if the hope is backed up by sincere actions to realize that hope. The current continuing growth in the size and strength of the middle class in Pakistan, if continued for another decade, can do wonders in empowering the people and taking the power away from the small elite that has ruled Pakistan since its inception. Let’s be patient. Let’s not ever give up hope.
Thursday, January 17, 2008
Foreign Remittances by Pakistanis Rising
Overseas Pakistanis sent home over $3B during July-December 2007 period. This is up 19.4% over the same period last year, according to a report in Business Recorder, Pakistan's financial daily newspaper. The biggest inflows came from the US with $874m followed by Saudi Arabia with $563m, UAE with $500m, GCC countries with $457m, UK with $227m and EU with $89m. The remittances to Pakistan are rising at twice the overall rate of remittances from developed to developing countries.
These remittances also compare favorably with the foreign direct investment of $1.87B in Pakistan in the first half of 2007 which increased by 67% over the same period in 2006.
In addition to these inflows, Pakistan earns about $18B a year through exports and receives another $750m annually in US aid.
While good economic policies by Pakistani government have inspired confidence among investors and the business community, these additional inflows have clearly helped in achieving about 7% annual growth with rising incomes and the growing middle class clout in Pakistan.
Let's hope that this economic growth continues in spite the current political turmoil to give people hope in the long term for better lives under a true, non-feudal and enlightened democracy.
These remittances also compare favorably with the foreign direct investment of $1.87B in Pakistan in the first half of 2007 which increased by 67% over the same period in 2006.
In addition to these inflows, Pakistan earns about $18B a year through exports and receives another $750m annually in US aid.
While good economic policies by Pakistani government have inspired confidence among investors and the business community, these additional inflows have clearly helped in achieving about 7% annual growth with rising incomes and the growing middle class clout in Pakistan.
Let's hope that this economic growth continues in spite the current political turmoil to give people hope in the long term for better lives under a true, non-feudal and enlightened democracy.
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