awaken investor interest - home - united worldsive military operation, zarb-e-azb. it stands out as...

PAKISTANThursday, October 22, 2015

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Security and economic gains awaken investor interest

International rating agencies praise Pakistan over progress made on the security front, while the country experiences increased political stability and is poised to be the world’s next economic

turnaround story. In spite of these advances, Pakistan is still believed to be a country in turmoil, which is far from the realities on the ground

#PakistanTheWorldfolio#TheWorldfolio

Upon an invita-tion from Pres-ident Barack Obama, Prime Minister of Pa-

kistan Nawaz Sharif is in Washington today for a meeting at the White House, and he is set to bring good news. First and foremost, Mr. Sharif will tell of an encouraging re-cord on security that will be received here with a sense of relief. Indeed, his nation of 180 million is situated in one of the most volatile re-gions on the planet, tucked next to Iran and Afghani-stan – with which it shares a long border – in the west, China to the north and In-dia to the east.

After Mr. Sharif accepted his White House invitation in August, U.S. National Se-curity Adviser, Susan Rice, commended the Prime Minister for supporting re-cent talks between the Af-ghan government and the Taliban, and urged Paki-stan to intensify its efforts to counter terrorist sanc-tuaries inside its borders in order to promote regional peace and stability.

Ms. Rice’s comments were echoed by a U.S. of-ficial, whom the New York Times quoted as saying, “Addressing this challenge will be imperative for Paki-stan’s relations with its neighbors and with Wash-ington, especially given the recent upsurge in violence in Kabul and the Taliban’s bloody campaign this fight-ing season in Afghanistan.”

The office of Mr. Sharif hailed Ms. Rice’s visit to Pakistan and stressed the importance of cooperation between the two countries

in fighting Islamist extrem-ism. The Pakistani army has been combating the domes-tic front of the Taliban and its allies in the north of the country, along the border with Afghanistan.

“We will fight terrorism in all its forms and mani-festations, irrespective of who their sponsors are,” Mr. Sharif said recently in his address at the 70th ses-sion of the UN General As-sembly. “The global threat of terrorism cannot be de-feated unless we address its underlying causes. Poverty and ignorance are part of the problem. Extremist ide-ologies must be opposed.”

Pakistan’s efforts to com-bat terrorism are paying off : government statistics

show that major terrorist attacks have declined by 70% since last year. This significantly improved se-curity environment com-bined with the economic policies of Mr. Sharif ’s government are bearing fruit. For the first time in years, hope is palpable for Pakistani entrepreneurs and the general popula-tion, a quarter of which live below the poverty line. And international institu-tions as well as investors are taking note.

In August, the Inter-national Monetary Fund (IMF), which extended a $6.2 billion loan, praised the 4.1% growth in gross domestic product this year, projecting 4.5% growth

for next year. This perfor-mance is “helped by macro-economic stability, low oil prices, planned improve-ments in the domestic energy supply, and invest-ment related to the China-Pakistan Economic Cor-ridor. Inflation dropped to 1.8% in July. Despite de-clining exports, the exter-nal current account deficit narrowed to 0.8% of GDP. Foreign exchange reserves continued to increase at a

healthy pace and reached $13.5 billion at the end of June 2015, covering three months of imports,” said the IMF.

“Pakistan’s three-year IMF-supported program has produced significant achievements in reducing near-term risks, improv-ing the fiscal balance, and strengthening the foreign exchange reserves of the State Bank of Pakistan,” added the IMF’s Mission Chief for Pakistan, Harald Finger.

The World Bank, for its part, said, “Pakistan’s eco-nomic growth is showing signs of sustained recovery. Supported by a favorable slump in international oil prices and stellar imple-mentation of the IMF re-form program, growth re-covery remains underway, with projected GDP growth now at 4.3-4.6%,” it reported in September.

As credit rating agen-cies are upping Pakistan’s ratings – in June, Moody’s upgraded its sovereign credit ratings for the first time since 2008 and in September, Fitch assigned it a B credit rating with a stable outlook – foreign investors are starting to see potential in this strate-gic Asian country.

As in most parts of the developing world, China is leading and has pledged to invest about $46 billion in infrastructure projects, nearly equal to the amount of foreign aid the U.S. has provided to Pakistan over the past decade to support its war in Afghanistan, according to Bloomberg. Fitch also noted that “the China-Pakistan Economic Corridor initiative an-nounced in April could significantly strengthen Pakistan’s economy.”

Western investors have also shown interest, as re-flected by major interna-tional business media such as The Wall Street Journal (“Pakistan’s pleasant sur-prise”) and The Economist (“Pakistan is enjoying a rare period of optimism about its economy”).

As the London-based chief economist at Renaissance Capital, Charlie Robertson, told Bloomberg News in June, Pakistan “is the best, undiscovered investment opportunity in emerging or frontier markets.”

“The global threat of terrorism cannot be defeated unless we address its underlying causes. Poverty and ignorance are part of the problem. Extremist ideologies must be opposed”

NAWAz SHARif,Prime Minister of Pakistan

Pakistan Prime Minister Nawaz Sharif talks with U.S. President Barack Obama at the Nuclear Security Summit in March 2014

Our World

A UNITED WORLD SUPPLEMENT PRODUCED BY: Paulina Gallardo, Country Director, Miguel Caso, Editorial Director, Lucia Flematti, Proj-ect Assistant, Leandro Cabanillas, Regional Director, Fatima Ruiz Moreno, Regional Director

in partnership within partnership with

Embassy of Pakistanin the United States Board of investment

“Pakistan’s three-year IMF-supported program has produced significant achievements in reducing near-term risks, improving the fiscal balance, and strengthening the foreign exchange reserves of the State Bank of Pakistan”

HARALD fiNgER,iMf Mission Chief for Pakistan

2 Thursday, October 22, 2015 Distributed by USA TODAYPAKISTAN

Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content

Op-Ed: U.S. and Pakistan in a “long term and mutually beneficial partnership”

As the arc of in-stability extendsits tentacles from Africa tothe Middle East,

with shadowy forces like Islamic State of Iraq and the Levant (ISIL) seeking to expand influence on the fringes of South Asia, President Obama’s call for forging counter-terrorism partnership from Sahel to South Asia must be viewed as a timely initia-tive geared to stemming this emerging exponent of violent extremism.

Pakistan, the largest democratic Muslim state in South Asia, is joining hands with the United States and other civilized nations of the world in our enduring struggle against extremism. Pakistan and the United States have suc-cessfully collaborated in the past to extinguish the core of the terrorist group known as Al-Qaeda from the region, and indeed Pakistan has credentials to offer its support to the in-ternational community for this monumental task once again. After all, Pakistan has been both a frontline state and itself the greatest victim of terrorism.

As Ambassador of Paki-stan to the United States, I wish to highlight some key developments in the coun-try that have transformed its security and economic paradigm over the last two years, making Pakistan an even stronger partner of the international commu-nity in stemming the rising tide of ISIL and promoting peace and prosperity in South Asia.

On assuming office in 2013, Prime Minister Mu-hammad Nawaz Sharif understood that peace and development were in-

divisible for the country and that progress on one objective could not wait at the cost of the other. The government’s response to terrorism and militants challenging the writ of the State was the comprehen-sive military operation, Zarb-e-Azb. It stands out as a critically important national endeavor that has enjoyed unflinching sup-port of all the major po-litical parties and has been fully owned and blessed by the people of Pakistan. Eighteen months down the road, Zarb-e-Azb is the greatest success story of not only Pakistan’s coun-ter-terrorism history but has also been acknowl-edged and appreciated by the defense experts around the world. Today, we can proudly say that Zarb-e-Azb has broken the backbone of all terrorist networks operating from Federally Administered Tribal Areas (FATA) and their command and con-trol structures have been completely destroyed.

The nation-wide effort is not confined to eradicating terrorist networks and de-stroying their safe havens in FATA. In line with the National Action Plan, intel-ligence-based law enforce-ment and clean up opera-tions are also proceeding throughout the country in-cluding in major urban cen-ters to eliminate any terror-ist sleeper cells. Overall, it is no small achievement that while incidences of terrorism continue to rage in many troubled spots of the world, in Pakistan ter-rorism attacks have come down almost 70%.

Meanwhile, thanks to the wide ranging eco-nomic reforms introduced by the government, Paki-

stan’s economy is showing positive signs of recov-ery. Resultantly, inflation has reached its lowest in several years and foreign-exchange reserves of the country have more than doubled, touching their highest level ever (over $18.6 billion).

The efforts of the Gov-ernment are also bearing fruit on the energy front. The roadmap for installing 21,000 megawatts (MW) of cheap energy in the short, medium and long terms has been finalized. We intend to tap coal, gas, hydel, renewable and nuclear energy resources. The government has add-ed more than 3000 MW of operational capacity to the national grid, half of which is directly linked to U.S. assistance in the en-ergy sector cooperation. What’s more, the conclu-sion of the China Paki-stan Economic Corridor (CPEC) in April this year for an ambitious portfo-lio investment of $46 bil-lion (mainly focusing on energy related projects) will be a game changer in turning Pakistan’s eco-nomic fortunes. It will also serve as a source of prog-ress and prosperity in the wider South Asian Region. Multiple projects already

at advanced stages lend us the confidence that Paki-stan’s energy crisis will be largely contained by end of 2017.

Pakistan’s growing en-gagement with the World Bank – as evidenced by the approval of an unprec-edented $11 billion ‘Coun-try Partnership Strategy’ for Pakistan (2015-2019), as well as the release of eight tranches by the In-ternational Monetary Fund (IMF) as part of its Extend-ed Fund Facility program – is proof of the international community’s growing con-fidence in the direction of our economy.

Acknowledging these positive developments, Moody’s and Standard and Poor’s have upgraded Paki-stan’s credit rating and eco-nomic outlook from stable to positive. Bloomberg has recently short listed Paki-stan as one of the attrac-tive emerging markets in the next few years. A new energy policy, new security policy, initiation of several big and small dams and en-ergy projects as well as re-gional connectivity initia-tives like CASA 1000 and TAPI (Turkmenistan-Af-ghanistan-Pakistan-India-Pipeline) are all promising signs of a better, stable and progressive Pakistan.

Pakistan is also commit-ted to playing a positive role for restoring peace and stability in the region. Pakistan has demonstrated resolve and willingness to facilitate an Afghan led reconciliation between all stake holders in Af-ghanistan. As a responsible neighbor, Pakistan is ready to make peace with India on principles of sovereign equality and mutual re-spect in order to resolve all disputes, big and small, for lasting peace in South Asia.

Having consolidated its democratic institutions af-ter a peaceful transition in 2013, Pakistan stands tall in the comity of nations as a large Muslim majority democratic State commit-ted to political pluralism, good governance and the rule of law. Pakistani me-dia is conspicuously free, our courts are indepen-dent, civil society is vigi-lant and our business and

corporate culture is en-trenched in the principles of free market economy.

It is this democratic and stable Pakistan that offers the best chance of part-nering with the United States and other nations of the world to deal with our common challenges, rang-ing from violent extremism to climate change, nuclear proliferation and refugee crises. Pakistan and the U.S. are already working closely in many of these areas under the Strategic Dialogue Framework. With more convergences on re-gional stability, economic integration and mutual desire to expand people to people contacts, this rela-tionship is transforming into a long term and mutu-ally beneficial partnership.

As Prime Minister Mu-hammad Nawaz Sharif visits Washington DC this week on the invitation of President Obama, the two leaders will discuss all these issues in great detail. I am confident that Prime Minister’s engagements in DC will contribute to further strengthening the relationship not only for the benefit of the peoples of Pakistan and the United States, but also for peace and stability in South Asia and the broader region.

With the two countries joining forces to combat violent extremism, ensure regional stability, and develop economic integration, relations are stronger than ever, writes Jalil Abbas Jilani, Pakistan’s Ambassador to the U.S.

The China-Pakistan Eco-nomic Corridor (CPEC) is being referred to as a game changer, and rightfully so. Pakistan is strategically lo-cated on the China-Middle East and China-Central Asia routes. Gwadar port in Paki-stan offers China the prospect of access to the warm waters of the Persian Gulf through a ‘Maritime Silk Route’. It also offers the prospect of signifi-cantly reducing the region’s cost of doing business in Afri-ca, Europe, and the Americas.

The Corridor, connect-ing Kashgar in China to Gwadar, will reduce China’s oil import costs from the Middle East significantly down to one-third of what it currently incurs. This new route measures 3,626 miles till Central China (and only 2,295 miles till West China) – compared to the route through the Strait of Ma-lacca, which amounts to a distance of 9,912 miles.

The CPEC will bring a promised $46 billion worth of Chinese investment to Pakistan, with $11 billion be-ing utilized for infrastructure development and $35 billion being channeled into energy ventures, which are expected to spur growth of industrial zones. The Corridor will also facilitate Pakistan’s trade with the Central Asian republics.

Pakistan must seek to optimally utilize these re-

ciprocal benefits by pre-emptively mobilizing its industry and foreign & trade policies. Without this required groundwork, the Corridor will only serve as the realization of the Chi-nese Dream of obtaining a foothold in the Indian Ocean - through Pakistani soil, with protection being offered on Pakistani tax-payer money by the Paki-stani armed forces.

Trade Crossroads: strategic positioning on a promising emerging trade route and the China-Pakistan Economic CorridorOp-Ed: Sirajuddin Aziz, President and CEO of Habib Metro Bank says that the China-Pakistan Economic Corridor will bring in $46 billion worth of Chinese investment

Eighteen months down the road, Zarb-e-Azb is the greatest success story of not only Pakistan’s counter-terrorism history but has also been acknowledged and appreciated by the defense experts around the world.

Thanks to the wide ranging economic reforms introduced by the government, Pakistan’s economy is showing positive signs of recovery. Resultantly, inflation has reached its lowest in several years and foreign-exchange reserves of the country have more than doubled, touching their highest level ever (over $18.6 billion).

Pakistan and the U.S. are already working closely in many of these areas under the Strategic Dialogue Framework. With more convergences on regional stability, economic integration and mutual desire to expand people to people contacts, this relationship is transforming into a long term and mutually beneficial partnership.

KUWAIT

QATARUAE

OMAN

IRAN AFGHANISTAN

TURKMENISTAN

PAKISTAN

INDIA

CHINA

RUSSIA

NEPALBHUTAN

MONGOLIA

BANGLADESHMYANMAR LAOS

SRI LANKA

VIETNAM PHILIPPINES

THAILANDCAMBODIA

KYRGYZTANUZBEKISTAN

KAZAKHSTAN

SAUDIARABIA

YEMEN

Sirajuddin Aziz, President and CEO, Habib Metro Bank

Jalil Abbas Jilani, Ambasasador of Pakistan to the U.S.

A map which shows the route of the China-Pakistan Economic Corridor compared with maritime trade route


3Thursday, October 22, 2015Distributed by USA TODAY PAKISTAN

CONCENTRATION OF EXPORTS 2014-15

GDP GROWTH

3.6%(2010-11) (2011-12) (2012-13) (2013-14) (2014-15)

3.8% 4.24%4.03%3.7%

Other items

Cotton manufactures

Leather

Rice

GDP COMPOSITION 2014-15

10.62%

9.68%

18.26%

13.36%

3.14%

24.06% 20.88%

Other services

Agriculture

Large scalemanufacturing

Other industrial sector

Whole sale & retail trade

Transport, storage & communication

Finance & insurance

55%

31%

9%

5%

United World: Paki-stan has been dubbed by Forbes as the ‘next suc-cess story’ and the best-undiscovered investment opportunity by Bloom-berg. How would you evaluate Pakistan’s grow-ing pains over the last two years? Dr. Miftah Ismail: We have not lived up to our poten-tial in the last fifty years, or twenty years. But the last two years have been really foundational for us, we’ve made a very solid founda-

tion in the last two years, and fortunately for us the results have started com-ing in better than we ex-pected and sooner than we expected. In this last fiscal year, from July to June, we have had growth of 4.25%, which is the highest in 8 years. The Inflation rate was 2.11% on a year-on-year basis, which is again the lowest in 13 years. The State Bank of Pakistan has been able to bring down the interest rate to 6.5%, which is the lowest in 42 years.

We also have now the high-est ever foreign exchange reserves in our history. So we have come a long way in terms of getting the right foundation in Pakistan al-though we are not where we need to be. We need to be at 7-8% growth or more. We’re not happy with just 4.25%, but we understand that the world´s economy is slow-ing down so this is a good achievement for us.

How would you evalu-ate the role of the BOI to attract and promote in-vestment from the USA and which are the main challenges to overcome in your opinionUS is a large trading part-ner for Pakistan, US is a large investor in Pakistan, directly and also indirect-ly. US obviously is a large technology partner as well. The US government in-stitutions are helping the Pakistani Government to develop better tools to govern, whether it’s the power sector or humani-tarian aid. We enjoy very good relations with the US, probably the best in many years. They make a great effort encouraging both US investors and over-seas Pakistanis to invest in Pakistan. We are trying to increase investments from the US based on sound key economic fundamen-tals. The US Exim Bank is providing more loans for US companies to invest in Pakistan. Some companies that are already present in the country are doing a great job such as GE. They are very active in Pakistan; a third of all power gen-eration in Pakistan comes through GE turbines. US obviously has unbeatable technology, therefore we want to use their expertise. The Prime Minister’s visit

to Washington DC and Chicago will give a great and better understand-ing of the country and the wonderful changes that have happened already in Pakistan; this story needs to be told.

China is expected to in-vest about $46 billion into infrastructure and energy projects under the so-called China-Pakistan Economic Cor-ridor (CPEC). In your opinion, how will this enormous inflow of FDI boost Pakistan´s eco-nomic growth? What will it change?The corridor does two or three things for us. It im-proves our electricity gen-eration capabilities because they will install power plants in Karachi, Sindh and Pun-jab as well as and solar and wind power plants. It also upgrades our transmission and distribution infrastruc-ture because electricity is not just about producing it but also about transmitting it efficiently and distribut-

ing it to the final client. Our road and rail infrastructure will be upgraded. We also plan to establish special economic zones where you can have factories that are set up by Chinese investors or others. We are fervently promoting free trade and regional connectivity and we look forward to becom-ing a trade partner to all interested nations.

Reliable and liberal regulation is key to be-coming an attractive in-vestment destination. In your opinion, what ad-vantages do Pakistan´s investment policies offer compared to other coun-tries in the region? FDI is as protected in Paki-stan as it is anywhere else in the world. We have legal guarantees, Pakistani laws to protect investments. We have never nationalized a foreign industry in Pakistan and we have signed foreign arbitration clauses for large investment in Pakistan. So investment is much pro-tected, there is no doubt

about that. Is Pakistan an easy place to do business? I think so. Is Pakistan a lucra-tive place to do business? I think so as well. Is Pakistan as easy as Switzerland and Singapore? Probably not but there is another side to this equation. For instance, if you invest in Pakistan in power generation, you get a minimum 17% return on investment, that’s a guaran-teed ROI in Pakistan. We are a very thriving democracy, with very independent me-dia and very independent courts. Look at the KSE, in the last 14 or 15 years it has given more than 20-30% real return in dollar terms. So there is a history and record of KSE being one of the best performing stock markets in the world. P&G, Unile-ver Pakistan, Nestle Paki-stan, all of those companies are staying in the country. Coca Cola is investing 350m dollars in Pakistan as well. There must be some reason they’re staying here. There’s only one reason I would say, they’re making money, very good money.

Companies are making “very good money” hereDr. Miftah Ismail, Chairman of the Board of Investment, discusses Pakistan’s growth potential and what it is that makes the South Asian nation such an attractive investment proposition

W here to i n v e s t is one of the hardest

decisions investors make. They have to balance re-wards and risks, look at past track record, future oppor-tunities, and consider a host of regulatory issues. But no matter what calculus inves-tors’ use, Pakistan offers some of the best invest-ment opportunities around the world.

With close to 200 million people, about two-thirds of whom are 25 or less, Paki-stan offers a growing con-sumer market and a skilled and disciplined workforce. With proven large coal, copper and hydrocarbon reserves Pakistan has some of the best natural resourc-es globally. And after two years of successful stew-ardship of the economy by Prime Minister Nawaz

Sharif ’s government, all the fundamental economic in-dicators are pointing in the right direction.

Since the early 90s we have guaranteed 17% an-nual dollar return in ener-gy. Almost everyone who has invested in energy in Pakistan wants to invest more. That tells you about our track record and future potential. General Electric is poised to install mul-tiple power plants by 2017. Our consumer markets are booming too and many US-based multination-als, Coke, Pepsi and P&G included, keep investing more in Pakistan.

And it’s not just large players who find Pakistan lucrative. Smaller com-panies, from IT start-ups to solar technology firms find Pakistan a great des-tination for investment and outsourcing of busi-ness processes.

A great destination for investment In this op-ed, Chairman of the Board of Investment, Miftah Ismail, discusses why Pakistan offers some of the best investment opportunities in the world

Miftah ismail, Chairman of the Board of investment



F ew countries have experienced such a swift and whole-sale turnaround inprospects as Paki-

stan, and having faced seem-ingly insurmountable chal-lenges just over two years ago the country’s economy is now focused on continuing growth.

Pakistan had struggled on the global stage but since Prime Minister Nawaz Sharif ’s election win in 2013, sweep-ing reforms have enabled the Pakistani economy to return to prosperity.

The most vital aspect of Mr. Sharif ’s actions after tak-ing office was to stabilize the economy and provide a sound and reliable footing for busi-nesses and the private sector. The country approached the International Monetary Fund (IMF) for support in 2013 fac-ing a balance-of-payments cri-sis that has since been averted. Importantly, however, the Pakistani government has also ramped up reserves at the State Bank of Pakistan (SBP), and in August recorded the highest reserves figure achieved by the country to date.

Such statistics, and Mr. Sharif ’s regulatory interven-tions, have helped to slash the country’s fiscal deficit, which had loomed over Paki-stan and topped 8% just three years ago. It has since dropped to under 5%, enabling the country to regain access to international capital markets and implement a long-term strategy for growth.

“Pakistan started broad-based reforms under the Ex-tended Fund Facility (EFF), covering resolution of struc-tural issues, removal of energy shortages and inefficiencies, consolidation of fiscal ac-counts, strengthening of finan-cial stability, and enhancement of central bank independence,” explains Ashraf Mahmood Wathra, Governor at the State Bank of Pakistan.

“These reforms, along with the decline in oil prices, have definitely catalyzed signifi-cant improvement in macro economic conditions over the last two years,” he says, adding that reserves have been vital in ensuring stability in the foreign exchange market. Domestic reforms have also been cru-cial to Pakistan’s recovery and regulatory changes to both taxation and the energy sector have brought returns, deliver-ing real GDP growth.

“The last two years have proven helpful in uplifting the economy of the country,” says Finance Minister, Mohammad Ishaq Dar. “GDP growth was recorded at 4.24%, while the government has managed to bring down the fiscal deficit to 5.3% from 8.8%.”

Elsewhere inflation fell to a decade low of 4.5% earlier

this year, compared with 8.6% in 2014, and further monetary easing is expected to help pro-pel a widespread recovery in private sector investment. The result of this, it is hoped, will be improved growth numbers with a real GDP target of 5.5% set for 2016.

Pakistan’s widespread program of reform has cut across many sectors but one of the most important moves was to reduce costly and in-efficient electricity subsidies which have been slashed from 2% to just over 0.5% of GDP this year. Further drops are expected, until the fig-ure reaches around 0.3% in 2016, and Mr. Wathra says the result of such actions has been to create a more buoy-ant macro environment for the country that “has already allowed SBP to focus on growth, and reinforce trans-mission of monetary policy.”

Mr. Wathra is also keen to see SBP expand its remit and the formulation of an indepen-dent monetary policy decision-making committee would enhance operational indepen-dence of the State Bank as it pursues price stability, he says.

“The proposed reforms would further improve the governance structure; strengthen personal autonomy of Board members; and ensure the financial autonomy of the SBP,” continues Mr. Wathra, who adds that the financial organization has already in-troduced measures to improve the interest rate corridor.

While some reforms have come as a direct result of Mr. Sharif ’s policies, Pakistan has also benefitted from the global slump in oil prices. As a net importer, the result has effec-tively been a cash injection for the country that perhaps for-tuitously arrived as the govern-ment itself focused on tackling

the country’s infamous energy shortage issues.

Electricity outages are com-monplace and the infrastruc-ture for both creation and sup-ply of power across Pakistan has hindered the country for decades, stunting economic development and providing constant challenges for the populace as a whole.

Efforts are now being made across the energy sector and there are plans to entice inter-national investment to develop infrastructure and supply proj-ects. Chinese companies have been quick to make the most of the considerable opportunities on offer while the recent agree-ment between the US and Iran looks set to kick start Pakistan’s oil and gas industry, with the country strategically placed to benefit on many fronts.

Furthermore, Pakistan’s tax system has been revamped with numerous Statutory Regulatory Orders, or SROs, that allow loopholes for tax exemptions and concessions to be closed. These changes have come hand-in-hand with improvements to the country’s trade regime with some initial

steps on improving the busi-ness climate and the privati-zation of public enterprises already underway.

These reforms have been in-cluded within Pakistan’s Vision 2025 project, which outlines a roadmap for the country and aims to move the Asian nation into a group of upper-middle-income countries within a de-cade. To achieve this, a GDP growth of around 8% will be required between 2018 and 2025, something Mr. Wathra says can be achieved by focus-ing on developing the work-force, ensuring sustained and indigenous growth, and main-taining governance through institutional reform and mod-ernization of the public sector.

Equally important will be encouraging private sector and entrepreneurship-led growth and developing a competitive knowledge economy, adds Mr. Wathra, while modernizing transport infrastructure and re-gional connectivity is also key.

“We know achieving this high growth will be challenging,” the SBP chief says, who admits that reaching the target while dealing with terrorist threats and issues such as climate change will re-quire persistence.

Yet Pakistan has become one of the more stable coun-tries in the region over the past two years and its macro economic outlook is largely positive. Its IMF program is on track and ratings agency Moody’s recently upgraded Pakistan’s credit rating by a notch, reflecting a “stable out-look”, something noted by the country’s finance minister.

Mr. Dar says the upgrade is “recognition of Pakistan’s ro-bust economic performance that the foreign exchange re-serves are at a record high to-day and exceed $18.5 billion.”

And Mr. Wathra says the buoyant economy means lon-

ger term strategies can now be put into play. “Fortunately, these positive developments and improving business sen-timents have created much needed room for the policy makers to focus on a compre-hensive reform and growth strategy. To further strengthen this hard earned macroeco-nomic stability and to unleash the growth potential, Pakistan is following a well-defined reform process to deal with structural rigidities.”

Key strategies include the privatization of loss making public sector enterprises, which will free up fiscal resources and - with improved tax revenues - mean more money can be injected into vital infrastruc-ture developments.

Private sector investment is also expected to surge as companies are enticed to assist with Pakistan’s energy short-age while companies from the US are increasingly interested in forging ties with the oil and gas sector in the country. The China-Pakistan Economic Corridor (CPEC) is also set to provide further avenues for foreign direct investment, and the construction sector is poised to boom.

“It is set to gain from mega infrastructure projects and growing private sector resi-dential projects,” adds Mr. Wathra. “Work on road con-struction under CPEC is likely to gather pace during the year and the manufacturing sector will be a major beneficiary as the construction and allied in-dustries are likely to gain from this increasing activity.”

Such a positive outlook is driving interest amongst in-vestors and the financial sector is proving particularly attrac-tive, with a consistent track record of profitability. The industry still has considerable room for expansion, with only 12% of the country’s 180 mil-lion population having access to financial services meaning growth prospects aplenty.

“Not only are large banks performing well, middle-tier banks have also evolved into good shape in terms of growth, profitability, and solvency,” Mr. Wathra says. “Being an emerg-ing economy with decent pro-

jected GDP growth figures, there is enormous room for expansion in our banking sec-tor. Our national investment policies are quite liberal, and we welcome foreign investors; they not only bring in invest-ments in our country, but also share with our banks their ex-periences of business model and governance.”

The combination of an im-proved regulatory system, po-litical reform and the added boon of low oil prices have all combined to help Pakistan’s economy grow on a sustain-able basis, while an improved security situation is helping to grow confidence in the coun-try. But Mr. Wathra is keen to attract investors for both finance and their expertise in order to help put the nation onto the right track to achieve its Vision 2025 target.

“With improved security sit-uation and a more comfortable external account, foreign inves-tors are now tracking Pakistan. And why not? This country of-fers immense potential due to a large domestic market, as well as its geographical location that provides a gateway to central Asian countries.”

“The first tangible success is the start of development work on infrastructure and energy projects under the CPEC. While China is in-creasing its stakes in Pakistan in various other sectors like telecom, and renewable en-ergy, Japanese investors have also shown keen interest in investing in Pakistan’s auto-mobile sector and coal-based energy projects. Similarly Russian and Korean firms are also planning to enhance investment in Pakistan’s infra-structure and energy sectors.”

The US is also a major source of FDI in Pakistan, with a total stock of US$1.2 billion. In 2015, it had a share of 32% of total net inflows, according to Mr. Wathra, with energy and information technology sectors proving particularly attractive for American inves-tors. The oil and gas explora-tion sector still has “a lot of potential” as well, he adds.

The two countries have al-ready agreed to facilitate and accelerate private investment in clean energy projects with the aim to add at least 3,000 megawatts to Pakistan’s na-tional grid within the next three to five years and there are also plans to cement ex-port ties between the nations with a Bilateral Investment Treaty (BIT). While the US has supported the country in its fight against terrorism, Mr. Wathra is clear that he wants to see concentrated efforts on improving trade - and not simply receive aid payments, yet another clear marker of the growth ambitions that Paki-stan now holds.

Political change and regulatory reform help Pakistan to emerge as a major growth prospect with a burgeoning economy and numerous investment opportunities

Sweeping reforms pave theway for economic prosperity

Public and private programs help build better society

When world leaders gath-ered at the United Nations in September to make a commit-ment toward eradicating ex-treme poverty by 2030, it was an opportunity for Pakistan’s leaders to really measure the progress the country has made toward improving conditions for its poor.

In recent years the govern-ment has increased its outreach to impoverished families by ex-panding the Benazir Income Support Program (BISP), the largest safety net program in

the country’s history and one of the largest in South Asia. The short-term objective of the program was to cushion the adverse impact of the food, fuel, and financial crisis on the poor, but its broader objective was to provide a minimum income support package to those most in need and to those who are highly vulnerable to economic shocks ranging from illness and unemployment to natural disasters. With funding help from the World Bank, BISP currently provides direct cash transfers to nearly five million families, up from 1.7 million families since the program was launched in 2008.

The size of monthly ben-efits has also increased by 25% over the last two years. An-nual spending for the program reached more than $928 mil-lion last year. And new tech-nology updates such as bank debit cards and free cell phones in some communities have

helped to improve transpar-ency and the delivery of funds to beneficiaries.

For instance, more than 100,000 women are now reap-ing the benefit of a new cell phone and for the first time learning to engage in modern day technology.

To get their handsets, BISP clients must bring their national identity cards and have their thumbprints checked against the National Socio Economic Registry (NSER), the infrastruc-ture key to the success of the program. The NSER hosts a da-tabase of more than 27 million households, the first in South Asia and determines beneficiary qualification based on an objec-tive targeting system.

In another government ini-tiative, poor families are also getting a break from the ris-ing cost of energy. In Pakistan where the electricity supply far outweighs demand, the lowest consumers of electric-

ity, those using 50 kilowatt hours a month and below are exempt from electricity price increases which this year was more than 30%.

While the lion’s share of so-cial assistance is still managed by the government, the private sector, particularly the bank-ing industry, has stepped up its efforts to support the commu-nity through its Corporate So-cial Responsibility programs.

When a 7.7 magnitude earthquake struck the province of Balochistan, killing nearly 400 people and injuring hun-dreds in September 2013, Unit-ed Bank Limited (UBL) one of the oldest and largest private banks in Pakistan announced it would assist in building a village to help relocate victims of the quake. UBL for the last several years has been very ac-tive in its support of education and health care. The Forman Christian College, the Karachi School of Business and Leader-

ship, and the Institute of Busi-ness Administration are among the schools it has assisted with donations for scholarships and infrastructure improvement.

“We aim to provide acces-sible education, affordable and high quality healthcare and improvements in infrastruc-ture and community wellbe-ing through a detailed and all-encompassing CSR pro-gram,” said Wajahat Husain, President and CEO of UBL. “We intend to take our vision forward to become a recog-nized player in a viable Paki-stan, by entrenching ourselves as a leading corporate citizen and, in doing so, reaching out and elevating the standards of living and fulfilling dreams.”

Habib Bank Limited (HBL) views itself as a partner in community building and its CSR efforts have included pro-moting youth sports as well as assisting with education and health initiatives.

“Through our sports divi-sion, which has given the na-tion hockey and cricket heroes, we added new high impact programs to engage our youth who possess talent and need our backing,” said Sultan Ali Al-lana, Chairman of HBL. “One such initiative was our celebra-tion for Pakistan’s Street Chil-dren Football Team, who made us all proud by making it to the Street Children’s World Cup in Brazil and winning a bronze medal in 2014.”

The Al Baraka Bank in Pakistan adheres to Islamic principles of banking so it doesn’t offer interest; instead depositors share in the risk and wealth that the bank cre-ates. Social responsibility is baked into all aspects of the business and plays a role in the decision-making, strategy, and operations. The firm and all its branches embrace the community development as part of its mission.

Government initiatives, such as the Benazir Income Support Program, combined with the Corporate Social Responsibility projects of Pakistan’s private sector are ensuring aid is being given to the most vulnerable and creating hope for a better future

“Positive developments and improving business sentiments have created much needed room for the policy makers to focus on a comprehensive reform and growth strategy. To further strengthen this hard earned macroeconomic stability and to unleash the growth potential, Pakistan is following a well-defined reform process”

ASHRAf MAHMOOD WATHRA, governor, State Bank of Pakistan

“The IMF Executive Board welcomed the authorities’ commitment to economic reforms and noted that economic activity in Pakistan is picking up pace and vulnerabilities are gradually receding. At the same time, it called for continued efforts to lock in the recent macroeconomic stability gains as well as for maintaining the momentum of structural reform to achieve high and durable growth over the medium term”

HARALD fiNgER,iMf Mission Chief for Pakistan

Minister of finance, Mohammad ishaq Dar



Alittle more thantwo years after the first-ever handover from one civilian go-

vernment to another, the numbers coming out of the macroeconomic cruncher are confirming that Paki-stan is back on course to sustainable growth. Busi-ness-friendly policies and reforms initiated by Prime Minister Nawaz Sharif ’s ad-ministration have led some to compare Pakistan with Colombia as champions in the economic turnaround category, citing their stable governments, market-ori-ented reforms and manage-able security situations.

With GDP growth pre-dicted by the International Monetary Fund (IMF) to end the year at 4.5%, it can fairly be said that Pakistan is actually doing better than the United States or Canada, as The Economist magazine pointed out to its readers in May. That same month, the State Bank of Pakistan slashed interest rates to their lowest level in 42 years, triggering a spurt in con-sumer spending and boost-ing home purchases in the GDP-critical construction sector. Not least of all, the Karachi Stock exchange was up by a year-on-year 16% as of this past July, and Bloom-berg did not hesitate to place it among the world’s top 10 securities markets.

“Our government has taken painful yet necessary reforms since taking office in June 2013 which has re-sulted in the stabilization of the economy,” Minister of Finance Mohammad Ishaq Dar told attendees at a US-Pakistan business confer-ence in March. “I can con-fidently inform you that the economy of Pakistan has been put back on the right track due to the far-reaching structural reforms, stabiliza-tion measures and initiatives of the past 21 months.”

This state of affairs is a far cry from 2013, when the IMF had to step in with a $6.6 billion credit to defuse the balance of payments cri-sis that greeted Mr. Sharif on taking office.

Pakistan’s fiscal deficit, which then stood at 8.8%, has since been trimmed to 5.3%. However, it still comes up short of the 4.9% cap the government had been aim-ing for this year and had pledged to meet as a condi-tion for IMF support. Ac-cording to the State Bank of Pakistan Governor Ashraf Mahmood Wathra, plans for staying within budget were derailed by the devastating floods of 2014 and security operations in the north of the country.

“On top of the flood di-saster in itself, we were con-fronted with nearly 300,000 internally displaced people fleeing the area,” Mr. Wathra recalls. “The government is supporting them and they will have to be sent back and rehabilitated as well. We missed our target of 4.9% but we are hopeful the IMF will understand that those were clearly necessary, though un-budgeted, expenses.”

Mr. Wathra and his team have much to be proud of, including the recovery of Pakistan’s depleted foreign reserves, which had fallen to $8 billion at one point but are now hovering around $19 billion. When sector-by-sector results are sorted out and compared with their benchmarks, nobody expects the larger picture to be a uni-formly rosy one. “For the first time in our history, demand for our exports has declined,” says the state bank head.

But these are all problems that admit solutions, and the sense that the country has turned the corner is palpable at all levels of Paki-stani society. Among those

with a highly positive take on prospects for prosperity is Wajahat Husain, Presi-dent and CEO of United Bank Limited (UBL) one of the country’s most respect-ed banking institutions.

“When you talk about oil prices going down you have to keep in mind that 35% to 40% of our import bill comes from oil, so clearly this is a big plus for the macro numbers,” says Mr. Husain. “With a narrowing deficit combined with the government’s resolve to get the energy situation right, you can’t ask for a better platform for initiating and completing the large-scale infrastructure projects that Pakistan is in dire need of.”

As an example of UBL’s commitment to innovation Mr. Husain points to Omni, an electronic platform in which a wide range of secure banking services are avail-able to both account hold-ers and walk-in customers at a ‘Dukaan’ - an unstaffed electronic outlet that extends far beyond the network of branch offices.

As Pakistan’s economy gets back up to speed, the banking sector will continue to play a leading part in the recovery. In three years, the total value of assets held by the banking system has climbed from $116 to $147 billion. Pakistan has also mandated implementation of the Basel III regulatory framework on all banks op-erating in the country to give the system additional resil-ience and transparency.

An IMF report released in August confirms that earn-ings remain robust and key solvency rations high for the banking sector’s big time players as well as for the of-ten-underestimated middle tier. In the first quarter of 2015, UBL’s profits soared by 36.8% over the previous period a year earlier. Core earnings and non-interest income helped offset an in-crease in operating expens-es. End of year results were equally striking at another long-established bank, Habib Bank Ltd (HBL), where prof-its surged by 24.9% to total Rs16.9 billion last year.

What was the strategy that made recovery possible? Mr. Wathra cites the imple-mentation of a Financial In-clusion Program (FIP) that includes risk sharing initia-tives, smart grant facilities for capacity development, innovation and market in-frastructure development since 2008 primarily for sus-

tainable development, and growth of the microfinance sector, branchless banking, and SME finance.”

HBL was founded shortly after independence in 1947, and has established itself as Pakistan’s largest commer-cial bank, with a presence in 29 countries, including in the United States since 1973. It serves eight mil-lion customers and aims to become the first Pakistani lending institution with two billion rupees on deposit by the end of 2015, as well as the largest corporate port-folio in the country.

With 1,600 branch offices and 1,700 ATM outlets stra-tegically positioned across the country HBL holds the number-one spot, acknowl-edges Mr. Nauman K. Dar, the bank’s President and CEO since 2012, who has overseen the introduction of an array of new products and services including in-ternet banking and a cash-back credit card for fuel pur-chases. “Innovation is HBL’s hallmark and we have always delivered financial products which aim to provide ease and convenience to improve our customers’ financial well being,” notes Mr. Dar. “This is another step towards strengthening existing con-sumer product portfolios while providing quality prod-ucts to our customers.”

Both HBL and UBL were previously owned by the government and success-fully privatized. The gov-ernment’s sale of its last remaining shares in HBL last April was the largest provatization deal in the last decade, with $764 million of the total sale price of $1.02 billion coming from foreign sources such as Morgan Stanley, Wellington and Templeton. Roughly half of the price realized went to pay off a tranche of the IMF loan. That success was rap-idly followed by the govern-ment’s decision to offload the remaining 20% of their UBL shares, in what was the first equity transaction by the Privatization Commis-sion in the last eight years.

The National Bank of Pak-istan acts as the commercial arm of the State Bank of Pak-istan, but is in the process of transitioning from public sector to become a commer-cial bank, says its president, Syed Ahmed Iqbal Ashraf. “Government revenues are collected by the NBP and given to the State Bank or the Ministry of Finance. Then whenever our country needs financial expertise, we are always there. We work

for the sake of business and in the national interest.”

At the retail-banking end of Mr. Ashraf ’s remit, the emphasis is increasingly falling on Sharia-compliant banking. NBP has five Is-lamic banks and 15 Islamic windows in operation. “The State Bank of Pakistan is en-couraging banks to separate Islamic banking from the conventional type. For this reason we are establishing a bank with separate manage-ment, a different CEO and totally different staff. I be-lieve that other banks will be working along the same lines. At the moment Islamic banks hold 14-15% of the deposits. I think this will rise very quick-ly as people believe that it is a safer type of banking.”

After all, in banking, it is the bottom line that counts and Pakistan being a coun-try with a population of 180

million people where only 12% currently have access to essential financial services, there is still a lot of room for growth.. Local players are aware of the opportuni-ties awaiting them if basic operations like paying utility bills are made available to an immensely wider customer base in the northern part of the country, says Sirajuddin Aziz, President and CEO of Habib Metro Bank (HMB).

“Until three years ago, HMB was largely centered in Karachi, the country’s commercial capital,” recalls Mr. Aziz. “We also had a sparsely spread branch net-work in the north. Since then, we have worked on strategic organic growth by enhancing our branch out-reach with a particular fo-cus on northern Pakistan.”

Opportunities in Pakistan’s banking sector and other ar-eas under development may come as old news to canny foreign investors. In 15 of the 21 locally incorporated pri-vate banks, foreign investors are the majority sharehold-ers. Together, those 15 banks hold over 50% of the sector’s total assets.

“The US has been con-sistently involved with Paki-stan since the 1950s and understands the terrain, the people, the logic and even the political system better than any other trade/busi-ness partner,” says Mr. Aziz. “Infrastructure development offers many attractive oppor-tunities. Many listed compa-nies are looking to link up to a major American firm. So I think Americans have got a greater understanding of Pakistan than some others.”

As Pakistan’s economy gets back up to speed, the banking sector will continue to play a leading part in its recovery. In three years, the total value of assets held by the banking system has climbed from $116 billion to $147 billion

Robust earnings and high solvency for big time banking players

“I can confidently inform you that the economy of Pakistan has been put back on the right track due to the far-reaching structural reforms, stabilization measures and initiatives of the past 21 months”

MOHAMMAD iSHAq DAR,Minister of finance

“With a narrowing deficit combined with the government’s resolve to get the energy situation right, you can’t ask for a better platform for initiating the large-scale infrastructure projects that Pakistan is in dire need of”

WAJAHAT HUSAiN, President and CEO, United Bank Ltd

“Whenever our country needs financial expertise, we are always there. We work for the sake of business and in the national interest”

SYED AHMED iqBAL ASHRAfPresident, National Bank of Pakistan

“The Financial Inclusion Program (FIP) includes risk sharing initiatives, smart grant facilities, innovation and market infrastructure development for sustainable development and growth of the microfinance sector, branchless banking, and SME finance”

ASHRAf MAHMOOD WATHRAgovernor, State Bank of Pakistan

Ashraf Mahmood Wathra, governor of State Bank of Pakistan



There can be no question that Is-lamic banking has become an in-creasingly signifi-

cant part of the global develop-ment agenda. On a worldwidebasis, the Sharia-compliant financial services sector has witnessed remarkable growth, with deposits and other assets under manage-ment currently totaling be-tween $1.5 and 2 trillion.

Many people outside the Is-lamic community are vaguely aware of what Islamic banks do not do, which is charge or pay interest. Instead, the customer enters into a kind of joint venture deal with the bank in which increases in the market valuation of a given asset are shared out between them. (In theory, losses are too, but Sharia law prohibits speculation and a bank that could not meet its commit-ments would self-destruct.)

In Pakistan, faith-based fi-nance has expanded from a niche activity to emerge as a

sector in its own right where all the important growth in-dicators have been outpac-ing those of conventional banks. The government is encouraging foreign financial service providers to consider entering the market segment that now accounts for around 12%-14% of turnover.

The National Bank of Paki-stan (NBP) is a major Paki-stani commercial bank with headquarters in Karachi. Al-though state-owned it oper-ates as commercial bank, and

opened its first Islamic bank-ing branch back in 2006.

“We now plan to convert 150 National Bank conven-tional branches to Islamic banking by June 2017,” says Syed Ahmed Iqbal Ashraf, President of NBP, whose massive expansion plans in the Islamic banking sector is indicative of the industry’s rapid growth.

“As part of this plan, one con-ventional branch was success-fully converted to an Islamic Banking Branch (IBB) in 2014 and we are converting 64 more branches to IBBs in 2015.”

Habib Bank Limited (HBL) was the first commercial bank established after indepen-dence in 1947 and has since become the biggest. Today, HBL also ranks as Pakistan’s second-largest provider of Islamic banking services, an-chored by a nationwide net-work of 45 branch offices and some 500 windows.

One of the big names in Islamic banking is the Bah-rain-based Al Baraka Bank-

ing Group (ABBG). Since its founding in 1978, it has creat-ed a strong international pres-ence and become involved in one capacity or another with initiatives in 15 countries, such as the European Islamic Investment Bank and the Is-lamic Bank of Britain.

In Pakistan, ABBG was one of the pioneers in Islamic banking, starting up opera-tions as far back as 1991. The CEO of Al Baraka Pakistan Limited (ABPL), Shafqaat Ahmed, credits its successes to “the advantage of global expo-sure. We bring in those things which the other local banks don’t even have the access to.”

Al Baraka offers a diverse product portfolio that con-forms to Shariah principles while at the same time meeting the needs of a broad customer base that includes individuals as well as corporate clients and SMEs invited to choose from a wide range of deposit and in-vestment schemes.

Wajahat Husain, President and CEO of United Bank

Limited (UBL), needs no con-vincing that Islamic banking is a big part of its institutional future. “Last year our bal-ance sheet grew by 47%,” he explains proudly. In several areas where demand is high, UBL is converting its conven-tional banking branches into Islamic ones.

With a state-of-the-art technology platform, UBL has been able to make Islamic banking facilities or windows available at all its branches. “We rely on a renowned Sharia board, and under its expertise and guidance we en-deavor to become the fastest-growing Islamic bank in the country,” Mr. Husain adds.

Another bank determined to raise its Islamic profile is the Habib Metro Bank (HMB). “Islamic finance products have great prospects and are immensely appreciated by the market,” says the bank’s president and CEO, Sirajud-

din Aziz. About 10%-12% of HMB’s assets are Sharia-com-pliant. Even so, he acknowl-edges “a lot has yet to be done in terms of understanding the principles of Sharia and creat-ing awareness in the market for potential customers.”

Meanwhile, the Securities and Exchange Commission of Pakistan (SECP) has ap-proved a four-member Sharia Advisory Board. The Al Bara-ka bank played a central role in pressing for the introduc-tion of legislation relating to Islamic financial products, as the Central Bank had previ-ously drawn up regulations for only conventional bank-ing practices. The SECP has also been active in drawing up regulations affecting the is-sue of Sukuk (Islamic bonds), with an aim to strengthening governance and broadening their appeal to investors.

Islamic finance growth outpaces conventional banking

Islamic finance has expanded from a niche activity to emerge as a sector in its own right where all the important growth indicators have been outpacing those of conventional banks

Shafqaat Ahmed, CEO of Al Baraka Pakistan Limited (ABPL)

“Islamic finance products have great prospects and are immensely appreciated by the market. …A lot has yet to be done in terms of understanding the principles of Sharia and creating awareness in the market for potential customers”

SiRAJUDDiN AzizPresident and CEO, Habib Metro Bank

“We plan to convert 150 National Bank conventional branches to Islamic banking by June 2017. As part of this plan, one conventional branch was successfully converted to an Islamic Banking Branch in 2014 and we are converting 64 more branches in 2015.”

SYED AHMED iqBAL ASHRAf,President, National Bank of Pakistan

Pakistan’s economy is fuelling growth across sectors, with its financial sector providing numerous opportunities for global investors

Banks enjoy unprecedented expansion over past two years

Pakistan’s revival in fortunes since the election of Prime Minister Nawaz Sharif has seen

the country’s economy enjoy surging growth since 2013, with a multitude of oppor-tunities for foreign investors now emerging.

Few sectors better high-light this than the country’s financial industries, which have enjoyed unprecedent-ed expansion during the past two years. Profits are up and demand for services is growing, with the coun-try’s population increas-ingly looking for banking services where previously they had not.

Recent figures clearly in-dicate the potential of the Pakistani banking sector, with companies such as Habib Bank Limited (HBL) recording six-monthly prof-its of PKR 16.9 billion ($162 million) in the first half of 2015, up nearly 25% on the same period last year. Elsewhere United Bank Limited (UBL) has enjoyed consistent growth and Mr. Wajahat Husain, the firm’s President and CEO, says his company’s success reflects that of the sector – and the country – as a whole.

“UBL is the second larg-est private sector bank in Pakistan, and if you were to follow its progress, it would tell you the story of how the banking sector has performed, in spite of the economic challenges,” he says.

Overcoming those chal-lenges have helped to turn around Pakistan’s fortunes and delivered confidence to the market. Importantly, it is not just domestic opti-mism either – international investors are increasingly bullish about the poten-tial for Pakistan’s banking sector and of the 21 lo-cally incorporated private

banks, foreign investors are the majority sharehold-ers in more than 15. It’s a similar environment with the 10 microfinance banks, with 5 entities owned by foreign shareholdings.

Part of the reason for this has been because of the capital requirements intro-duced by Pakistan’s govern-ment, designed to ensure a stable and well regulated banking sector. The result has been that no sector, other than oil and gas ex-

ploration, has attracted as much foreign direct invest-ment as the financial sec-tor over recent years and deals such as the sale of the government’s HBL stake in April 2015 marked Paki-stan’s largest ever capital market transaction. With $1.02bn raised, and $764m from foreign investment, both local and internation-al investors have shown confidence in HBL’s future.

Similar arrangements have seen the Pakistani

government sell its stake in UBL, something Mr. Za-meer Choudrey, UBL direc-tor, described as a “resound-ing vote of confidence” in the company. Other firms, such as National Bank of Pakistan (NBP) have also enjoyed growth and its president, Mr. Syed Ahmed Iqbal Ashraf, says its suc-cess has come off the back of focused efforts on im-proving banking possibili-ties on a domestic and in-ternational stage.

“National Bank has always been a flag bearer for Paki-stan at national as well as in-ternational forums,” he says. “We act as the commercial arm of the State Bank of Pakistan, so all the revenues that the government col-lects are collected by the NBP and given to State Bank or the Ministry of Finance. Then whenever our country needs financial expertise, we are always there. We work for the sake of business and national interest.”

One aspect powering the Pakistani financial sector revival has been the qual-ity of assets that its banks now hold, with credit risks lower than regional peers: HBL, for example, has slashed its non performing loans by more than 50% to PKR 2.2bn.

There is also a more global outlook from Paki-stan’s financial firms, and the potential to entice new customers is huge.

“I hope that other Paki-stani banks will look out-ward and tap the Pakistani diaspora present across the globe,” says Ishaq Dar, Pakistan’s Finance Minis-ter, who has urged other fi-nancial institutions to look abroad for growth. “Our banks have the expertise to provide the best service in their domain and the bank-ing industry has done very well even during the last financial crisis.”

Indeed Pakistan’s finan-cial institutions have devel-oped numerous innovative schemes, often through joint ventures with tele-communications firms, to enable remote banking services. UBL has become a key player in the remit-tance market, processing a quarter of all payments that come into the coun-try. HBL is also a key player in the market with a 55% share in inward foreign re-mittances while NBP has partnered with Money-Gram to meet its clients’ needs, particularly those living in the Gulf region.

Despite such recent de-velopments, many of the country’s financial insti-tutions are already well-versed in operating abroad, with firms such as UBL

Recent figures clearly indicate the potential of the Pakistani banking sector, with companies such as Habib Bank Limited (HBL) recording six-monthly profits of PKR 16.9 billion ($162 million) in the first half of 2015, up nearly 25% on the same period last year.

“If you take a look at UBL’s DNA, you’ll notice we are the most successful bank in terms of having a diversified strategy geographically. Over 25% of our assets are overseas, and over nearly half a decade we have managed to create the UBL brand in our niche targeted market in the Middle East”

WAJAHAT HUSAiN, President and CEO, United Bank Limited


7Thursday, October 22, 2015Distributed by USA TODAY PAKISTANDEPOSITS - QUARTERLY FLOWS

Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

Customer deposits - Fixed Customer deposits - CA(R)

Customer deposits - Saving Customer deposits - CA(NR)

PKR billion

-70

180

430

680

-320

BANkINg SECTOR PROFITABILITY

Nº of Banks

PKRbillion

JUNE 2014 JUNE 2015

10

20

30

<6 4,6 2,4

6 79

12

54

5

19

15

0,2 >0 <6 4,6 2,4 0,2 >00

having numerous offices across the globe.

“If you take a look at UBL’s DNA, you’ll notice we are the most success-ful bank in terms of hav-ing a diversified strategy geographically,” says Mr. Husain. “Over 25% of our assets are overseas, and over nearly half a decade we have managed to cre-ate the UBL brand in our niche targeted market in the Middle East.

“We are present in four continents. We are in the Middle East, the U.S., in Europe (the U.K. and Switzerland), and we made our debut in Africa via Tanzania.”

With a presence in 29 countries¸ HBL claims to be Pakistan’s largest domestic multinational. Habib Metropolitan Bank (HMB) also enjoys a glob-al presence through Habib Bank AG Zurich, its par-ent organization. It has fi-nancial institutions locat-ed in 10 countries across four continents and Sira-juddin Aziz, President of HMB, says the network is “another attractive factor for clients as we can offer them the cost efficiencies provided by our internal trade linkages.”

Such international ex-pansion is also helping do-mestic coffers and Pakistan has enjoyed a remarkable transformation over the past two years as increased political stability has pow-ered progress that has been helped by the falling oil price, something Mr. Aziz says has been a boon for the country.

“Pakistan is favored by a changing global market place with the oil prices dropping, the commodity prices generally being low and Pakistan importing heavily in terms of energy, which has added more sta-bility and balance.

“If you look at the infla-tion rate in the economy, it stands at the lowest that it has been in 42 years, which is a testimony to the Gov-ernment having success-fully managed the macro factors of the economy; other proof of this is the contained fiscal budget deficit, which has been brought down from a high of 8.5% to below 5% – so things seem to be improv-ing in tandem. The impact of it to the man on the

street is not so visible yet and a better economic un-derstanding is needed for the people to appreciate these improvements.”

This is set to change however and the effect of both the oil price fall and the burgeoning finan-cial sector is set to be felt across huge swathes of the Pakistani economy. “UBL has been proactive and we have made the best of all viable opportunities to provide stable progres-sion, which is necessary from a systemic bank,” says Mr. Husain.

“With the interest rate scenario coming down, potentially, all the banks are highly liquid and will be focusing on every and any opportunity in the private sector, be it cor-porate, commercial, agri-culture, real estate... the complete gamut of oppor-tunities for financing the private sector.”

HMB is also looking to expand its services and Mr. Aziz says the firm wants to improve financial access for the country’s agrarian sector, adding that the company is al-ready providing resources to some of the industry’s corporate clients.

The domestic front also provides a huge range of opportunities for Paki-stan’s banks. Only 12% of the country’s population of 180 million has access to financial services and while profits have more recently come from in-vestments in bonds, the private sector is now widely seen as a mas-sively untapped source of potential revenues.

“We had investment in government securities, be-cause we had an opportu-nity in the long term, but now there is going to be a clear focus onto the private sector off take,” says UBL’s president Mr. Husain. It’s a similar story from Mr. Aziz at HMB, who says the potential to expand its customer base across the country, potentially us-ing the aforementioned remote services, is huge. The company has already been working on organic growth by enhancing its branch outreach across Pakistan and Mr. Aziz says he is now paying “particu-

lar focus” on reaching out to the customer base in Northern Pakistan.

Indeed both on the in-ternational and domestic fronts, opportunities are emerging for Pakistan’s financial sector. Foreign direct investment has also been ratcheted up to record levels but with the possi-bilities for extensive growth across growing sectors of the economy, further in-flows – especially from the US – are likely.

“Since the mid-fifties, the US has been consistently involved in investment within Pakistan and under-stands Pakistan’s terrain, people, logic and even the political system better than any other trade or business partner,” says HMB presi-dent Mr. Aziz.

“I would say it is much easier for US investors to come in and invest money here. Infrastructure devel-opment offers many attrac-tive opportunities; there are many listed companies looking to be linked up to a major American firm. The energy sector, especially oil and gas exploration,

also has great business po-tential here. Pakistan has been blessed with natural resources and American expertise regarding the re-lated industries would be very welcomed.”

UBL is also eyeing up op-portunities as the amount of investment coming into the country for sec-tors such as oil, gas, and infrastructure, increase. Mr. Husain says the ability of UBL “to contribute in terms of investments com-ing into Pakistan is of the top drawer and we are the best equipped to support any such initiative.”

HMB is also preparing for further growth and Mr. Aziz says his company has been forging relationships with global operators to provide a more interna-tional service. “Looking at the trade flows and trade patterns of Pakistan we have been able to create strategic and strong rela-tionships with other finan-cial institutions intermedi-ating international trade, to help our clients do business worldwide.”

Certainly Pakistan’s out-look has undergone a re-markable transformation over the past 24 months and its changing econom-ic fortunes are now being reflected by ratings agen-cies and investor senti-ment. The IMF program is widely seen to be on track and Moody’s has upgraded the country’s credit rating by a notch and assigned a stable outlook.

“Fortunately, these posi-tive developments and improving business senti-ments have created much needed room for the pol-icy makers to focus on a comprehensive reform and growth strategy,” adds Mr. Ashraf Mahmood Wathra, governor of State Bank of Pakistan.

He is now focused on maintaining stability and “unleashing the growth potential” by dealing with structural rigidities, includ-ing the privatization of loss making PSEs, increasing tax revenues and attracting further investment.

This is being aided by an improved security situ-ation and the creation of the China-Pakistan Eco-nomic Corridor, while his-torically low interest rates are also encouraging FDI inflows. Japanese inves-tors are moving into au-tomobiles and coal-based energy projects while Rus-sian and Korean firms are exploring infrastructure and energy sectors. And Mr. Wathra is clear that investors are only just scratching the surface of Pakistan’s potential.

“This country offers im-mense potential due to a large domestic market, as well as its geographical location that provides a gateway to central Asian countries,” he adds. “With an improved security situ-ation and a more com-fortable external account, foreign investors are now tracking Pakistan. And why not?”

“Certainly Pakistan’s outlook has undergone a remarkable transformation over the past 24 months and its changing economic fortunes are now being reflected by ratings agencies and investor sentiment. The IMF program is widely seen to be on track and Moody’s has upgraded the country’s credit rating by a notch and assigned a stable outlook”

“The domestic front also provides a huge range of opportunities for Pakistan’s banks. Only 12% of the country’s population of 180 million has access to financial services and while profits have more recently come from investments in bonds, the private sector is now widely seen as a massively untapped source of potential revenues”

“Since the mid-fifties, the US has been consistently involved in investment within Pakistan and understands Pakistan’s terrain, people, logic and even the political system better than any other trade or business partner”

SiRAJUDDiN Aziz, President, Habib Metropolitan BankBank

“National Bank has always been a flag bearer for Pakistan at national as well as international forums. We act as the commercial arm of the State Bank of Pakistan, so all the revenues that the government collects are collected by the NBP and given to State Bank or the Ministry of Finance. Then whenever our country needs financial expertise, we are always there”

SYED AHMED iqBAL ASHRAf, President, National Bank of Pakistan

“Innovation is HBL’s hallmark and we have always delivered financial products which aim to provide ease and convenience to improve our customers’ financial well being”

NAUMAN K. DAR, President and CEO, Habib Bank Ltd



Landmark MOU signed to form new stock exchange

W ith an en-e r g i z e d economy generat-ing new

opportunities for Pakistan totake advantage of its hu-man potential, a modern, closely regulated securities exchange plays a key role in raising and allocating the capital needed to get the productivity ball roll-ing. Commercial banks are often hard pressed to of-fer financing for long-term projects in a country where deposits and other instru-ments in their portfolios are mainly short-term or not readily liquid. Public sector institutions or multilateral lenders had to make up the shortfall, but even so, too many opportunities in both the public and private sec-tor had to be turned down on account of inadequate access to capital.

All that changed, however, when the Pakistani Stock Ex-changes were demutualized in 2012 and transformed into limited companies. The Karachi Stock Exchange, KSE, on its own now has an equity base of $80 million. Currently, shares and debt issued by 577 different com-panies are traded on the KSE that Bloomberg has ranked in third place on its list of the 10 best performing world capital markets. “Emerging Asia will require over a tril-lion dollars in infrastructure finance if growth is to be maintained anywhere near past levels,” says Nadeem Naqvi, Managing Director and CEO of the KSE.

Results confirm that mar-ket analysts who thought Pakistan was nearing the point of converting from a “frontier” to “emerging” economy have an argument worth making. “Pakistan of-fers very good returns with a minimum of 50% and even for the worst projects [inves-tors] get huge benefits. No other country in the world can offer the returns which Pakistan offers to investors,” says Aqeel Karim Dhedi, Chairman of AKD Securities Ltd, one of the leading secu-rities firms in Pakistan which provides a comprehensive range of investor focused ser-vices and accounts for more than 6% of the average daily value of the KSE.

The benchmark KSE-100 is up 16% this year, af-ter a rise of 200% over the past five years. The value of combined debt and equity capital raised on the Kara-chi exchange stood at $546 million by the end of 2014, up from 31 billion in 2013 and 22 billion over the pre-vious period. Investments denominated in US dollars originating from outside the country have climbed at an annual rate of 26% since 2008. Earnings in the bank-ing sector have risen 56%, compared with 2014.

All told, foreign interests invested over $2.3 billion in Pakistan’s premier capital market. As a backstop for bear markets in other coun-tries, it should be noted that Pakistani equities had zero correlation with the S&P 500 in 2014, according to a Bloomberg study.

Small and Medium Enter-prises, SMEs, have the hard-est time putting up collateral for bank loans, but they are responsible for creating and maintaining 95% of the jobs in Pakistan. Beginning this year, smaller concerns are being offered special breaks for listing their issues on a customized section of the counter, where the amount of paid-up capital required from them is just PKR25 million ($240,000) as versus the PKR250 million ($2.4 million) required from their larger counterparts. Simi-larly, during the first few years, norms in the corpo-rate governance code that big companies are required to adhere to will be relaxed for newcomers. Mr. Naqvi is particularly eager to see this initiative succeed. “Our job is to bridge the link between public equity and the private equity that is just starting to emerge in our country. As I see it, the SME exchange

would be the right outlet for private equity. This is one area I’m very excited about.”

U.S.-based investors who are unfamiliar with the South Asian marketplace now have the option of putting their money into a country spe-cific ETF (Exchange Traded Fund) as a vehicle giving them exposure to Pakistan’s blue chip performers.. Avail-able through the New York-based ETF specialists Global X, the dedicated ETF is listed as PAK, and tracks the performance of the MSCI 25/50 index.

Late this August, a giant step towards was taken when an MOU was signed in pres-ence of Finance Minister Ishaq Dar, to merge all three Pakistani Stock Exchanges into one. At the signing cer-emony, Mr. Dar said his gov-ernment remained commit-ted to a strong, vibrant and competitive capital market as a basic building block for a strong economy. “It is a

win-win situation for all con-cerned and will go a long way towards consolidating a sus-tainable capital market,” he said of the merger, and urged the three exchange share-holders to complete the dis-bursement process to speed the unification along. At the same time, he called on the regulatory agency, the Secu-rity and Exchange Commis-sion of Pakistan (SECP) to

implement a strong enforce-ment and compliance regime with zero tolerance for any attempt at market manipula-tion, inside trading, miscon-duct or abuse.

KSE boss Mr. Naqvi said that investors in Lahore and Islamabad would ben-efit from the merger with “better, quicker and more efficient price discovery”, as brokers in those two cit-ies will be able to place or-ders directly without having them routed through Kara-chi-based brokerages and an IT platform over which they have no control.

“The underlying philoso-phy behind the integration is that a single, deep and centralized stock exchange will bring greater efficiency, enhance regulatory oversight and improve the structure of the presently fragmented se-curities industry,” he added, and cited the more stringent criteria for risk management by the KSE as another aspect that will improve as a result of consolidation.

What comes next? Under the terms of its demutualiza-tion, the KSE is looking to sell off a 40% equity stake to strategic investors. Another 40% will be retained by bro-kers and the remaining 20% offered to the public as an Initial Public Offering (IPO). Among the share markets that have been approached with a view towards entering into a strategic partnership are ex-changes in Istanbul, London, Tokyo, and Malaysia. “Our objective is to have a partner who can bring great exper-tise and technology,” says Mr. Naqvi. “It’s a big change but I believe that once we get over the transformation phase, we will be as good as any other international stock exchange.”

Integration of the Karachi, Islamabad and Lahore stock exchanges follows the global trend of consolidation, a move clearly welcomed by foreign investors

“The underlying philosophy behind the integration is that a single, deep and centralized stock exchange will bring greater efficiency, enhance regulatory oversight and improve the structure of the presently fragmented securities industry”

NADEEM NAqvi,Managing Director and CEO, Karachi Stock Exchange



With a wide range of business interests, Y u n u s

Brother Group (YBG) isone of the largest and fast-est growing business con-glomerates in Pakistan that is made up of several sub-sidiaries. Since its incep-tion as a commodity trad-ing business house in 1962, YBG has grown remarkably over the last 50 years and it has today become the spon-sor of one of the largest in-dustrial units in Pakistan in the cement, chemicals, real estate, energy and tex-tile sectors. What’s more, the group now has some of the most sustainable and effective business relations with leading private and public sector organizations throughout the country.

Lucky Cement Limited (LCL) is one of the largest producers and leading ex-porters of quality cement in Pakistan with a produc-tion capacity of 7.75 million tons per annum. Over the years LCL has consistently been driven by the ethos: to be the leader of the cement industry in Pakistan and to contribute to industrial progress and a sustainable future by operating with state-of-the-art technology, making a positive impact on the environment and adher-ence to highest standards of quality. The company has embarked on the journey of global expansion by set-ting up cement grinding facility in Basra, Iraq and a cement manufacturing plant in Democratic Repub-lic of Congo (DRC). Lucky Cement has been listed

in Forbes Asia’s “200 Best under a Billion Company” several times.

According to Muhammad Ali Tabba, Group Director

of YBG and CEO of Lucky Cement Limited, the group’s success as a whole is entirely due to its unwavering faith in moving ahead, regardless of circumstances. “We never stop investing irrespective of the situation because in a country of 200 million peo-ple we will perish if we don’t take initiatives,” he says.

Although Pakistan’s eco-nomic performance as a whole has not been the most promising in recent times, Mr. Tabba is confident that through continued efforts being put on new projects and the expansion of exist-ing ones, YBG can play its part to further drive Paki-stan’s GDP growth.

“We are expanding our business in all directions

and making our corporate footprint more visible. Our closing business numbers are in excess of $1.5billion,” says Mr. Tabba

Indeed, YBG has stra-tegically expanded ex-ports across Asia - India, Sri Lanka, Afghanistan, as well as Tanzania, Mada-gascar, Mozambique, Ke-nya, and Uganda, among other African countries. Having already diversified in the energy sector with the establishment of Lucky Energy – a gas-based ther-mal power generation unit, YBG’s other ambitious project is Lucky Electric Power Company Limited. Lucky Electric Company is setting up a 660MW coal-based power project in Karachi. YBG also recently signed an engineering, pro-curement and construction contract for setting up a 50 megawatt wind farm for generation of electricity through wind turbine gen-erators being supplied by Nordex Germany.

In another example of its expansion, the group in 2012 acquired a majority stake with management control in ICI Pakistan Limited from the Dutch multinational and paints giant AkzoNo-bel N.V. ICI Pakistan’s pres-ence in this region predates the independence of Paki-stan and the company is a market leader in the field of soda ash, polyester, life sci-ences and chemicals. With over 70 years of successful operations, ICI Pakistan is a leading manufacturing con-cern supplying products to almost every industry in the country. ICI Pakistan enjoys a strong reputation for pio-

neering technologies, excel-lent customer service and an uncompromising culture of ethics, safety and people development.

Lucky One, a commer-cial and residential project by YBG, is yet another ex-ample of the group’s port-folio expansion. The Mall is to be built on 2.2 million square feet and will redefine the real estate contours in Pakistan. It will be several times the size of any mall in Pakistan and has attracted a multitude of local and inter-national retail brands while generating employment op-portunities in the country.

Gadoon Textile Mills Limited is another success story of YBG. Gadoon Tex-tile Mills holds the distinc-tion of being the second largest textile mill in the world to introduce compact core spun yarn. In Pakistan, it is the largest spinning unit comprising of nine produc-tion mills with more than 250,000 spindles installed under one roof. In Yunus Textile Mills, YBG also has a state-of-the-art vertical

integrated production fa-cility that has now become Pakistan’s largest exporter of home textile products. Yunus Textile’s clients in-clude some of the high end brands such as Walmart, Target and Macy’s and has subsidiaries in North America and Europe.

Mr. Tabba is no doubt enthusiastic about what such foreign trade, espe-cially with the United States means for Pakistan. “We al-ready enjoy good business relations with USA. We are trading textiles and looking forward to becoming part-ners in the energy sector. Their expertise can be very beneficial for our engineers and consultants. I think the world has to understand that Pakistan needs trade to expand its growth.”

There can be no doubt that YBG, one of Pakistan’s most successful business conglomerates is leading the way in this respect. While domestic companies could certainly do well for them-selves and for their country by emulating the success of the group, Mr. Tabba says there are great opportuni-ties in Pakistan for foreign investors and that they only need to look at the success of business houses like YBG to realize that.

“Those who want to in-vest in Pakistan must come here,” he says. “People are re-luctant to invest in Pakistan based on the perception that it is a volatile country. But if you have a closer look at the results achieved by multina-tionals operating here, you will realize that few other places offer such an attrac-tive return on investment.”

Yunus Brothers group (YBg) is leading the way in Pakistan in terms of boosting the country’s trade and diversifying its economy. With a turnover of U$1.6 billion as of June 2015, YBg has steadily expanded its operations and exports over a number of years. group Director and CEO of YBg’s flagship company Lucky Cement Limited, Muhammad Ali Tabba says that increasing foreign trade is vital for the future of Pakistan

“The world has to understand that Pakistan needs trade to expand its growth”

“We never stop investing irrespective of the situation because in a country of 200 million people we will perish if we don’t take initiatives...We are expanding our business in all directions and making our corporate footprint more visible. Our closing business numbers are in excess of $1.5billion”

MUHAMMAD ALi TABBA,group Director of YBg

YBg has grown remarkably over the last 50 years and it has today become the sponsor of one of the largest industrial units in Pakistan in the cement, chemicals, real estate, energy and textile sectors. What’s more, the group now has some of the most sustainable and effective business relations with leading private and public sector organizations throughout the country.



Pakistan’s oil and gas sector had struggled to establish itself on the global stagebut the country

is now emerging as a key in-ternational player following the recent collapse in global oil prices.

Figures from the Interna-tional Monetary Fund (IMF) suggest that the Asian na-tion already stands to save around $18.5 billion over the next three years thanks to the fall in the price of oil but the benefits to Pakistan go far beyond what might seem like straightforward economics. The country is now enticing international investments from around the world, with China recently committing more than $46 billion for transport and energy proj-ects in the country – high-lighting the vast potential that Pakistan is offering to global investors.

Few sectors of the coun-try’s economy offer the po-tential returns that its oil and gas industries can provide. Arguably one of the biggest developments to Pakistan’s fortunes over the recent cou-ple of decades has been the historic nuclear deal between Iran and the US, which is set to transform the way the country’s oil and gas sector can operate. Indeed, this pact looks set to ignite the O&G sector in Pakistan and finally enable the country to address its chronic energy shortage.

“The oil and gas sector of Pakistan is on the rise and working hard to fulfill the na-tional demand,” says Shahid Khaqan Abbasi, Minister of Petroleum and Natural Re-sources of Pakistan.

“We have had a very posi-tive two years with this gov-ernment despite the fact that there was a political domestic upheaval. Inflation has gone down and the investment levels are unprecedented, as Pakistan has signed for over $50 billion investments from Chinese companies in in-frastructure. Plus, the lower price of oil has also helped.” he continues. “The biggest challenge for the government has been the power shortage, and we are very hopeful that within the next five years Pak-istan will overcome its energy shortage and can have surplus in power production.”

Such a situation would be a considerable achievement and a major benefit for Paki-stani businesses that have had to regularly deal with power outages and incon-sistent supplies for decades. When the U.S. finally lifts the sanctions, Iran is expected to add roughly a million barrels of oil a day to global produc-tion – lowering oil prices by $10 per barrel next year, ac-cording to the World Bank. For a net importer of fossil fuels, the consequences for Pakistan could be great.

“Pakistan is a country that today relies on imported liq-uid fuels and domestic natural gas; over the last two decades the domestic natural gas pro-duction has stagnated and the

dependence on imported liq-uid fuels has grown substan-tially,” Mr. Abbasi says.

“Taking into account that the cheapest way of transport-ing gas is through pipelines and that we have a neighbor and a near neighbor who have the largest gas reserves in the world, this represents a great advantage to Pakistan. Iran has the second largest reserve in the world and Turkmeni-stan the fourth.”

Indeed Pakistan’s govern-ment is hopeful that the U.S. and Iranian deal will mean the country can at last start to construct planned pipe-lines that will link the two countries like never before. The so-called ‘Peace Pipeline’ was first proposed by a young Pakistani civil engineer in the 1950s and it is hoped that its completion will provide not just O&G benefits but also help to curb cross border ter-rorism and maintain stability within the region.

“Pakistan imports over 6 million barrels of crude and 10 million tons of petroleum products a year, the possi-bility of imports of Iran can mean lower prices for Paki-stan due to a more competi-tive environment and lower transportation cost. We need to increase trade with our neighbors and we are hope-ful that the new geo-political situation will mean new op-portunities for Pakistan,” ex-plains Mr. Abbasi.

Indeed, the Iranian and Pakistani pipeline will im-pact countries across the region. India is also keen on developing a link with Iran and Mr. Abbasi adds that there are plans for an exten-sive network that will en-able countries such as Turk-menistan to benefit as well. The potential of a North to South gas pipeline is also be-ing discussed with countries including Russia, Qatar and China, but the potential of all these plans will likely pro-vide benefits far beyond the oil and gas sector. It is hoped they will contribute to better growth prospects for Paki-stan and its neighbors, and engender a more cohesive relationship between coun-tries in the region and more cohesive thinking between partner countries.

“We are very hopeful that before the end of 2017 gas pipelines will be built and gas will flow into Pakistan,” adds Mr. Abbasi. “Furthermore, the pipelines will not only connect Iran with Pakistan, but India is also interested in building a pipeline from Iran. Iran-Pakistan ground-break-ing should be in October and the Turkmenistan ground-breaking will be in December, which is a $10 billion project.”

Clearly such developments come at great cost but Paki-stan has already been success-ful in attracting international investors that are aware of the potential windfalls. The

country has received an un-precedented $2 billion of Chinese investment in 2015, with deals such as Poly-GCL Petroleum Group of China agreeing to invest $500 mil-lion with Ocean Pakistan Limited (OPL) to power fur-ther exploration into oil and gas reserves within Pakistan. With a sedimentary base of around 800,000 square kilo-meters, the country of nearly 200 million has a huge po-tential that remains relatively unexplored and opportuni-ties across the upstream, midstream and downstream sectors are all available to be exploited. The government is also going to great lengths to boost oil and gas production within the country, drilling 81 new wells in 2015. It also aims to refine an extra six million tons of petroleum products next year, while reducing its import of refined products to 90% of total consumption.

The West has also been keen to explore opportuni-ties in Pakistan and the Asian country is actively looking to attract short and medium-term investments from entre-preneurs. Mr. Abbasi adds that the country’s historical records of providing returns to inter-national investors is helping to bolster confidence but he admits that foreign expertise is also meaning that the coun-try’s O&G industry can grow quicker and more efficiently.

“An American company has already become the big-gest player in the LNG field supplying ships and further-more, the US is also present in the oil and gas sector supply-ing expertise and technology.

“Pakistan has been receiv-ing foreign investments for more than 60 years and I have not heard of a single company that has defaulted here. So the legal framework and con-tracts are not problematic is-sues when it comes to foreign investment. U.S. investors can participate on the pipeline projects which are all open for investment, especially the Turkmenistan pipeline proj-ect,” he explains.

Ambassador of Pakistan to the United States, Jalil Ab-bas Jilani, says, “Pakistan has vast oil and gas resources and is looking for American investors interested in joint ventures. The Pakistani gov-ernment looks forward to pro-

ductive foreign investments and offers high rates of return in the LNG sector for example. US investors could participate in the pipeline projects, which are all open for investment, especially the Turkmenistan pipeline project.”

Pakistan currently imports around six million tons of pet-rol a year, mainly from Oman and Dubai, but Mr. Abbasi hopes the new deal with Iran could help the country lower its import costs even further.

“Instead of shipping long distances, Iran would ship short distances when it comes to Pakistan,” he says. “I think that trading with neighbors is the easiest way of trading – consequently we are very positive about this situation, and we are cer-tain that it will open a lot of investment opportunities.”

As the Iran-Pakistan pipe-line will not be ready before 2017, the government in-tends to raise its liquefied natural gas (LNG) capacity in the short term. Pakistan already operates the biggest LNG plant in the world, en-abling the government to import and store natural gas-ses for both the domestic and industrial sectors. This tech-nology allows substances like methane to be transported and stored incredibly effi-ciently, as they take up just 1/600 the volume of natural gas in its gaseous state.

The terminal was built in just 11 months – a record-breaking achievement made all the more impressive by the country’s relative lack of experience in the sector. “This is even more remarkable con-sidering that Pakistan had 5 separate failures at import-ing LNG over the last 8 years since 2006,” says Mr. Abbasi. “Our unbundled approach us-

ing a competitive bid process, with LNG off-take commit-ment by the public sector and construction by the private, is now a model for the industry in Pakistan.”

“Both LNG and pipelines have their own advantages,” adds Mr. Abbasi. “So expect Pakistan to be roughly a 15 million tons annual market within the next five years, and one of the top five markets in the world. A very positive result of all this will be the decrease of liquid fuels, both directly and indirectly.”

Pakistan already has one of the lowest carbon footprints per capita in the world, but it is determined to achieve even lower levels. The government has built one of the largest solar parks in the world in Bahawalpur, and is keen to encourage clean energy con-sumption where possible.

“Pakistan is a very respon-sible country when it comes to environment,” says Mr. Abbasi. “We are doing a lot of oil replacement with gas, so it is very clean in that sense. Also, a lot of vehicles have been converted into gas ve-hicles, which also contributes to the environment by de-creasing petrol consumption. Gas has many qualities that contribute to a better envi-ronment. Pakistan has over a 100,000 MW hydel potential; this source of power is now being pursued with several large dam and run of the riv-er projects under construc-tion in addition to smaller hydel projects.”

He adds, “I think every source of energy has its limi-tation – the solution being to integrate them all, especially the integration of gas. More gas availability will contrib-ute to the growth of other energy sources also.”

Pakistan’s government has also played a key role in pro-pelling the country’s oil and gas sector forwards, with considerable restructuring taking place across its energy sector. The industry had tra-ditionally been dominated by two utilities companies but these have been priva-tized and unbundled lead-ing to greater competition. It has also led to investment and the private sector energy generation capacity has in-creased markedly by around 30% since 2009.

Regulatory reforms have also taken place, with poli-cies being streamlined, tar-iff subsidies being phased out and business red tape being slashed - and this has partly helped to drive the rapid increase of foreign direct investment inflows, which is up around 26% this year alone.

Such a figure clearly dem-onstrates the surge of interest for investors looking at Paki-stan and there are few sec-tors that are generating such optimism. Domestic demand is only set to grow as lower oil costs help the country’s economy to expand faster, while the improved politi-cal environment is provid-ing a stable footing for those looking to Pakistan as a place to invest. Chinese and U.S. companies are already mak-ing their mark in the country by improving infrastructure across the O&G sectors but there remain considerable opportunities for further exploration, requiring in-vestment but also expertise. And with the potential boost coming from Iran’s recent settlement with the US, Paki-stan is fast finding that it has become an integral player on the global O&G stage, a posi-tion that it is now well placed to capitalize upon.

Global catalysts reignite oil and gas industry

Oil imports dip 20% due to international oil prices, which Pakistan’s Minister of Petroleum and Natural Resources reckons could put the country on track to achieve an energy surplus before the end of the decade

“Taking into account that the cheapest way of transporting gas is through pipelines and that we have a neighbor and a near neighbor who have the largest gas reserves in the world, this represents a great advantage to Pakistan”

SHAHiD KHAqAN ABBASi, Minister of Petroleum and Natural Resources

“Pakistan has vast oil and gas resources and is looking for American investors interested in joint ventures. The Pakistani government looks forward to productive foreign investments and it even offers high rates of return in the LNG sector for example”

JALiL ABBAS JiLANi,Ambassador of Pakistan to the United States

Pakistan already has one of the lowest carbon footprints per capita in the world, but it is determined to achieve even lower levels. The government has built one of the largest solar parks in the world in Bahawalpur, and is keen to encourage clean energy consumption where possible.

“The biggest challenge for the government has been the power shortage, and we are very hopeful that within the next five years Pakistan will overcome its energy shortage and can have surplus in power production”


Shahid Khaqan Abbasi, Minister of Petroleum and Resources



In a move described as a “game changer in the energy sector” by Min-ister for Petroleum and Natural Resources Sha-

hid Khaqan Abbasi, Pakistan has turned to imported Lique-fied Natural Gas (LNG) in an effort to solve its long-running energy crisis.

The developing country of more than 180 million people has long struggled to meet its rising energy needs due to a dearth of indigenous hydrocarbons and unreliable generation networks, prompting it to press ahead with the con-struction of its first LNG terminal, which opened earlier this year after be-ing built in world-record time. The $135 million terminal was completed in 335 days, when similar ter-minals elsewhere usually take at least three years to become operational.

A total of 30 ships carry-ing LNG are expected to ar-rive in Pakistan in the first year, bringing diversity and security to Pakistan’s energy supply. Power generation from LNG is estimated to increase from 1,800 MW to 3,600 MW by 2017 as a re-sult of this policy shift.

Pakistan has been facing a severe shortage of natural gas, both for its electricity generating plants and for general use by industrial sectors. Domestic gas pro-duction of 4 billion cubic feet per day (bcfd) is un-able to meet the country’s demand. Indeed, the sup-ply-demand gap is approxi-mately 2 bcfd and has been steadily rising.

Khalid Rahman, Man-aging Director of the Sui Southern Gas Company, one of the country’s leading integrated gas firms, says that Pakistan has hitherto depended too heavily on imported crude oil. LNG, he adds, will be crucial to make up the energy deficit.

The International Fi-nance Corporation has said that power outages are es-timated to cost Pakistan the equivalent of 7% of its gross domestic product per year, with blackouts and brownouts lasting up to 8 hours in urban areas and even longer in rural areas. In the latest enterprise sur-vey conducted in Pakistan, the absence of a reliable electricity supply was cited by two thirds of business owners and managers as the top constraint facing firms in the country.

Pakistan is importing its LNG from Qatar, the global leader in LNG exports by some distance. Qatar ex-ported 77 million tonnes in 2014, or one third of the global supply, according to an International Gas Union (IGU) report.

A major criticism faced by the government over its pivot towards LNG is the perceived high cost. Mr Rahman said: “We do rec-ognize that LNG is 50% or 60% more expensive than the indigenous resources, but we have to consider the options available right now for Pakistan.”

Minister Abbasi has consistently defended the price that Pakistan agreed with Qatar for LNG, claim-ing it is the cheapest rate in the world. In May 2015, the Minister told a meet-ing of the National Assem-

bly Standing Committee on Petroleum and Natural Resources that the govern-ment had succeeded in restricting the benchmark price to 14.5% of the Brent crude price. Minister Ab-basi pointed out that be-cause of certain clauses in the pricing mechanism; India was buying LNG from Qatar at around $13 per million British thermal units (mmbtu), whereas the cargo that arrived in Pakistan on April 27 cost $8 per mmbtu, for example. In that same meeting, the par-liamentary panel was told that if the price was kept at 14.5% of Brent crude rate, LNG would be around 10% cheaper than high sulphur fuel oil, 20% cheaper than low sulphur fuel oil and 50% cheaper than diesel.

“All this misinformation was being spread by the oil importers as Pakistan pur-chases furnace oil and die-sel worth $2.5 billion per annum and if LNG imports become successful, then who will buy furnace oil,” the Minister told the meeting.

In addition to the use in power generation, it is en-visaged that the imported LNG will also serve the fer-tilizer industry, bringing fur-ther benefits to the country and eventual savings to the economy. Minister Abbasi has calculated the over-all savings to the economy from importing and storing LNG to be used in power generation and industry at $1 billion annually. Fertilizer manufacturers have been exempted from sales tax on imported LNG products in effort to stimulate their in-dustry further.

In early September, Prime Minister Nawaz Sharif approved the con-struction of a second LNG terminal at Port Qasim and directed that it should be completed by the end of 2016 in order to satisfy urgent demand. The sec-ond terminal will have a capacity of 500 mmcfd. In-ternational Finance Corp. is making an equity in-vestment in the terminal and providing a loan of as much as $20 million, the World Bank affiliate has re-ported. The project is part of IFC and the World Bank Group’s strategy to mobi-lize as much as $10 billion in investments to address Pakistan’s power shortage.

The following month, it was announced that the Chi-

na Petroleum Pipelines Bu-reau will build a 500 mmcfd LNG terminal in Balochistan province, together with a pipeline that will bring gas from Iran to central Paki-stan. Work will commence in November 2015.

The LNG international landscapeWith LNG growing in glob-al importance, Pakistan is one of four new countries to enter the LNG market in 2015, together with Poland, Egypt and Jordan. “All eyes have turned to LNG as it has emerged as a useful back up resource for diversifying and securing energy sup-plies. Investment decisions on LNG projects, both firm and pending, were unaffect-ed by the unstable market and went ahead as planned,” according to the Interna-tional Gas Union’s World LNG Report 2015.

Overall, LNG trade glob-ally reached around 241 million tonnes in 2014, a 4.3 million tonne increase over 2013 levels, added the report.

Some 60% of the world’s conventional gas reserves are located in just four countries: Russia, Qatar, Turkmenistan and Iran. However, in terms of ex-ports, the top ranking coun-tries are Qatar, Malaysia, Australia and Nigeria.

A separate report by BG Group, an interna-tional LNG company, said that LNG supply has been stalled for the past three years. 2014 saw the start of exports from Papua New Guinea, the 19th nation currently exporting LNG. The two train PNG LNG plant exported its first car-go in May and by July was reported to be producing at a full capacity of 6.9 metric tonnes per annum. However, this new supply from Papua New Guinea was offset by reduced performance from some existing plants.

Jérôme Ferrier, Presi-dent of the IGU, has stated that there are enough re-serves of gas worldwide to prompt a global transition towards a gas-supported sustainable energy system, especially when shale gas is taken into account. He has made it clear that the world cannot meet its growing energy needs through re-newables alone, and if fos-sil fuels are necessary then natural gas and LNG is the best option.

For proponents of the sec-tor, natural gas should not be equated with polluting fossil fuels such as oil and coal. LNG is widely seen as the cleanest of hydrocarbons with key role to play in efforts to reduce global CO2 emissions, in line with the objectives COP21, the global climate change conference taking place in Paris in December.

The IGU has present-ed its vision for COP21 in which they promoted greater use of gas in the energy mix. Incoming IGU President David Carroll said, “Enhanced usage of natural gas is the single most effective way for the world to responsibly re-

duce emissions. Natural gas provides a proven solu-tion that works in almost any application for all en-ergy uses, is affordable and plentiful around the world.

“Of course COP21 is about carbon reduction, but en-

hanced gas usage will deliver reductions and materially address the very immediate health issue of air quality by virtually eliminating NOX and SOX pollutants and particulates that contribute to respiratory diseases such as asthma.”

As Mr. Rahman points out succinctly: “Gas is a cleaner fuel. It is definitely more economical than oil and especially compared to diesel, which power gen-eration companies are using constantly nowadays.”

In addition to its emis-sion-reducing role, gas can contribute to world peace, Mr Ferrier believes. This is because gas is a “longer-term business” than oil. “It requires physical infra-structures, be it pipelines or LNG trains, which con-nect buyers and sellers over a longer period. It is also more capital intensive: these projects easily cost tens of billions. So there is a common interest to pro-tect these investments and make them profitable.”

This type of cooperation can be seen in the gas pipe-lines under construction that will eventually connect Pakistan with Iran, India, Afghanistan and Turkmeni-stan (see page 14).

Power generation from LNG set to double by 2017 to 3,600 MWAs the cleanest hydrocarbon with a key role to play in the reduction of CO2 emissions, liquefied natural gas (LNG) is becoming increasingly popular across the globe. Pakistan is one of four new countries to enter the LNG market in 2015, together with Poland, Egypt and Jordan

Pakistan is importing its LNG from Qatar, the global leader in LNG exports by some distance. Qatar exported 77 million tonnes in 2014, or one third of the global supply, according to an International Gas Union (IgU) report

Minister of Petroleum Shahid Khaqan Abbasi has calculated the overall savings to the economy from importing and storing LNG to be used in power generation and industry at $1 billion annually

“All eyes have turned to LNG as it has emerged as a useful back up resource for diversifying and securing energy supplies. Investment decisions on LNG projects, both firm and pending, were unaffected by the unstable market and went ahead as planned”International Gas Union’s World LNg Report 2015

A total of 30 ships carrying LNG are expected to arrive in Pakistan in the first year, bringing diversity and security to Pakistan’s energy supply. Power generation from LNG is estimated to increase from 1,800 MW to 3,600 MW by 2017 as a result of this policy shift

“Gas is a cleaner fuel. It is definitely more economical than oil and especially compared to diesel, which power generation companies are using constantly nowadays”

KHALiD RAHMAN, Managing Director, Sui Southern gas Company

Ta’aluq Care Line: 0800-03000 | Website: www.psopk.comUAN: 111-111-PSO (776) | /PSOCL

PROGRESSINGTOWARDSPROSPERITYPakistan State Oil, the nation's largest Oil Marketing Company (OMC) is committed to fulfilling the fuel needs of Pakistan in a timely and responsible manner.

Serving around 3 million customers every day across the entire economic value chain, PSO strives to provide the highest quality petroleum products and services to its customers. Dedicated to keeping the wheels of progress moving forward, PSO is standing by the nation at all times.



Pakistan’s oil and gas sector is en-joying unpreceden-ted growth and itsdownstream sec-

tor is no exception, with surging demands propelling investment and infrastruc-ture spending.

The unreliable nature of the country’s energy supply has been well documented over recent years but as Pakistan’s economy enjoys a revival, the need for efficient refinery in-frastructure and distribution methods has become increas-ingly important.

Electricity black-outs are commonplace across large swathes of the country and Pakistan’s government, un-der the tutelage of Prime Minister Nawaz Sharif, is now focusing both its time and money on rectifying the situation.

This has come in numer-ous guises through both direct investment in infra-structure and plans to re-move red tape and regula-tory reform of the sector, which it is hoped will fur-ther increase local and for-eign interest in the market.

The $46 billion China-Pakistan Economic Cor-ridor is further proof that the Asian giant is becom-ing an increasingly at-tractive proposition for foreign investors.

“With improvements in political stability and security, keenness of the government, availability of a large, young, energetic and English speaking la-bor force, this is probably the best time to invest in Pakistan in the past two decades,” comments Tariq Rizavi, Managing Direc-tor of Pak-Arab Refinery Limited (Parco).

“With its strategic geo-graphical location at the crossroads of Central Asia and the Arabian Sea, Paki-stan is considered the re-

gional gateway for energy,” he adds. “The petroleum sector is amongst the most vibrant sectors. The coun-try is very open to foreign investment and has intro-duced an aggressive ex-ploration and production policy, allows unhindered repatriation of profits, and offers great oppor-tunities for international energy companies.”

Parco’s management sees international joint ventures as the best route ahead. “The foreign part-ner can bring in foreign fi-nancing, technology, pro-duction and management practices benchmarking with international stan-dards and the power of international brands,” adds Mr. Rizavi. “The lo-cal partner can contribute by its knowledge and un-derstanding of the coun-try; its domestic policies and business norms; op-erating conditions and critical factors of pro-duction and the market; consumer behavior and

selling practices; local fi-nancing; and inexpensive, energetic, versatile and trainable manpower.”

Parco already has expe-rience of such ventures, with the firm currently working with the Govern-ment of Pakistan, the Abu Dhabi Petroleum Invest-ment Company, OMV of Austria and Total SA of France. Its oil pipeline joint venture company, Papco, was created in a similar guise, with the likes of Shell and Pakistan State Oil involved. Parco also recently acquired Chevron Pakistan Limited and now intends to enhance its re-finery capacity by 20%, and it’s also looking to increase the throughput of its White Oil Pipeline and expand its LPG business.

Indeed there is little doubt as to the impor-tance of the downstream aspect of Pakistan’s oil and gas industries, which are estimated to have an-nual sales of PKR 1 trillion ($9.6 billion). The govern-ment’s efforts have come at a time when oil prices are lower than they have been for around a decade, with expected savings of around $18.5 billion over the next three years. Un-doubtedly this is providing challenges to the country’s downstream sector but the hope is that Pakistan – tra-ditionally a heavy importer of fuels – can capitalize on the lower import prices by improving its infrastruc-ture as the economy grows.

The downstream sec-tor already accounts for direct employment of around 100,000 people with another 25,000 or so in related industries. And there have been con-siderable changes to the market, with around PKR 30 billion being invested over the past five years across the sector to im-prove facilities. Mean-while the recent landmark deal between near neigh-bor Iran and the U.S. is set to provide further lo-gistical opportunities for companies in Pakistan. Cross-border pipelines are being mooted and com-panies are increasingly looking to invest to secure long-term profits.

One such firm is Pakistan State Oil Company (PSO), which had traditionally op-erated as an oil retailer and is now completing a 40,000 barrels per day (bpd) re-finery to help the country reduce its reliance on im-ported fuels.

This is being done through new investments and the acquisition of pre-viously foreign-owned ac-tivities, as well as through partnerships with inde-pendent or foreign tech-nology providers. The firm is one of the country’s largest in terms of turn-over and has been a leader in marketing the sector, both in black oil and white oil, with shares standing at 66.6% and 49.8% respec-tively this year.

The scale of PSO’s opera-tions are well known, with the firm serving around 3 million customers ev-ery day across the entire

economic value chain last year alone. It has more than 3,500 retail outlets and is estimated to control around 75% of the coun-try’s oil storage capacity.

Such infrastructure places PSO at the center of the government’s plans to improve Pakistan’s down-stream activities. Its range of products – from gaso-line and diesel to fuel oil, jet fuel and CNG – highlights its wider economic signifi-cance. The firm has also invested heavily in lique-fied natural gas (LNG) and earlier this year became the first company in Pakistan to import the product into the country via the FSRU Exquisite, a floating stor-age and re-gasification unit holding 148,000 cubic me-ters of the product. The deal marked a turning point for the company and country, and while the LNG market continues to throw up con-siderable challenges, PSO is confident that issues over the regularity and reliability of supply can be overcome.

The nature of Pakistan’s downstream oil and gas sector means this is likely, with considerable compe-tition in the market. More than 10 major players are present, including the likes of multinationals such as Shell and Caltex involved. PSO has maintained its position although like its competitors, the impact of the plummeting oil price has not left it untouched, while other operators such as Sui Northern Gas Pipe-lines Limited (SNGPL) are also focusing on new deals to secure growth.

In September, the firm signed a far-reaching agree-ment to supply three power plants with re-gasified liq-uefied natural gas (RLNG) in a deal that saw the com-pany linking with other Pakistani suppliers to pro-vide a sustainable supply from 2017. The deal high-lighted not only the com-pany’s clear ambitions, but also the wider optimism that is encircling the coun-try’s oil and gas sectors.

One of the industry’s headline-grabbing events of the year came in June 2015, when the Prime Minister inaugurated Pakistan’s larg-est oil refinery, whose ca-pacity to produce 120,000 barrels per day (bpd) could potentially satisfy around 39% of the country’s energy needs. The $750 million complex built by the Byco Group is capable of annu-ally producing 1.6 million tons of fuel, oil, 2.4 million tons of diesel, and 1.1 mil-lion tons of liquefied petro-leum gas (LPG).

At the inauguration, Mr. Sharif remarked that the project was a valuable addi-tion to the petroleum sector and would help in achieving the national goal of sus-tainable productivity and increased profitability. He also noted that the country needed some 22 million tons of oil but the country still lacked capacity to re-fine crude oil and that it would take time to achieve total self-sufficiency.

The new complex is the Byco Group’s second facil-ity and brings the Pakistani

company’s total refining capacity to 155,000 bpd. Management at Byco be-lieve it makes the country well positioned to import oil from abroad, and that the new installation could even be offered cheaper crude oil from Iran after the expected removal of in-ternational sanctions. Un-like other facilities tied to long-term contracts with crude oil suppliers, and who may find it difficult in changing to new suppliers, the new refinery is wide open to new deals and that could prompt Iran to con-sider offering a discount on crude oil supplies in a bid to open up its market, which would equally prove beneficial for Pakistan.

Prior to the new com-plex, the Pak-Arab Refinery (Parco) was the country’s largest refinery, with a re-fining capacity of around 100,000 bpd, followed by the 68,000-bpd National Refinery, 48,000-bpd Paki-stan Refinery, and 45,000-bpd for Attock Refinery.

According to its manage-ment, Parco’s mid-country refinery is operating at over 100% capacity. In re-cent years, the company has commissioned two ad-ditional plants for diesel hydrodesulphurization and asphalt production have been commissioned. “In ad-dition, Parco is aggressively evaluating and acquiring existing businesses and turning them around with its technical, human and marketing capacity,” says its MD Mr. Rizavi.

Parco was recently con-firmed as being one of 10 public-sector enterprises (PSEs) to be privatized as viable businesses over the next year. During the eighth review with the In-ternational Monetary Fund (IMF) for a $6.2 billion bailout package, Pakistan and the IMF agreed to ac-complish the privatization of 10 PSEs through stock market transactions.

With global oil prices re-maining stubbornly low, Pakistan’s importing ten-dencies are meaning the country is in a position to enjoy considerable savings that should power sustained economic growth. Compa-nies such as PSO, SNGPL and Parco undoubtedly face challenges adapting to this recent change, not least in securing long-term and reliable sources of energy for the country’s burgeon-ing demands. Yet the op-portunities this change of circumstance affords the companies – and the wider downstream sector as a whole – mean growth and investment should flow, de-livering benefits across the entire population.

Downstream sector gears up for technology and capacity upgradation as global oil prices allow room for achieving self sufficiency

Capital-intensive industry seeks foreign partners

SNGP

“The foreign partner can bring in foreign financing; technology; production and management practices benchmarking with international standards and the power of international brands”

TARiq RizAvi,Managing Director, Pak-Arab Refinery Limited (Parco)



With only two years at the helm the N a w a z

Sharif government has taken numerous measures to create an investment friendly envi-ronment, already improving regulatory oversight and pro-cedures that streamline and facilitate approvals.

Pakistan’s blessed geo-graphical location has pro-vided it with a bounty of op-portunities for oil and gas exploration and development, with a sedimentary base of more than 800,000 square kilometers offering extensive possibilities for those operat-ing in the upstream sector.

According to the shale gas study done under the US-AID Energy Policy Program, Pakistan has tremendous shale gas/oil resources in the middle-lower Indus basin alone. The risked recoverable free gas is estimated at 95 TCF with significant upside from adsorbed gas estimated at over 6,300 TCF. The same study has confirmed that the middle-lower Indus basin has approximately 14 billion barrels of risked recoverable oil in place.

Minister of Petroleum and Natural Resources, Shahid Khaqan Abbasi, highlights that it is important to note that Pakistan shared its geological data as part of the U.S. Geological Survey (USGS) from 1955 to 1970, while India and China were not on the U.S. bloc during the cold war. It had obtained multi-million dollar grants from the U.S. to the set up a geological survey of Paki-stan, including development of laboratories and facilities in all over the country.

Oil and Gas Development Company Limited (OGDCL) is one such company making the most of Pakistan’s natural resources and one of the flag-

ship firms for the country’s exploration and production (E&P) sector.

It posted record profits after tax last year that sur-passed the PKR 100 billion mark ($956 million) and in July reported that it had made a substantial discovery in the Punjab region of the country, suggesting the potential of the country’s E&P sector.

OGDCL has started explo-ration of shale oil/gas reser-voirs in the country, which recently approved $8 million for exploring shale oil/gas reservoirs, which according to the U.S. Energy Informa-tion Administration (EIA), shale gas/oil reservoirs esti-mates of Pakistan are backed by proven studies and veri-fied technical data.

At present, no shale gas is being produced in Pakistan and significant work is re-quired to kick start this high potential energy source.

“It must be underscored that shale gas cannot be dis-credited because of its huge potential, estimated to be enough for the next 70 years. Shale gas can be a real game-changer for Pakistan. The most glorious advantage of shale gas is the potential massive job opportunities for skilled and semi-skilled Paki-stanis,” says Mr. Abbasi.

OGDCL is not alone in Pakistan’s upstream sector however, with another major E&P player being Pakistan Petroleum Limited (PPL). Syed Wamiq Bokhari, Man-aging Director and CEO at PPL, believes the country is well placed to capitalize and perhaps most importantly make cost-effective invest-ments that will reap benefits in the longer term.

“If you work for the brave, today, there is an opportunity. In our industry, returns are after several years, it is a long cycle. If you are willing to in-vest now, your investments will be substantially lower, because the costs have gone down. We are seeing around a 20% reduction in most of our drilling and facilities, so this is very positive for those willing to be brave right now and make investments,” Mr. Bokhari explains.

PPL is well known as the operator of Pakistan’s larg-est gas reserve, the Sui field, which has been operational since 1952, but it has a further 47 exploration blocks and op-erates from 27 of them.

“We are very different in our operations. When I was working outside Pakistan and looking into some in-vestment opportunities in Pakistan, we did an analysis of all the companies here, and at that time I identified PPL as the partner of choice, and now I’m sitting here,” says Mr. Bokhari.

It is also keen to expand from its exploration and production activities and is well placed to increase its position as a provider of oil and gas to meet rising do-mestic demand.

From an international viewpoint, PPL is a mid-sized oil company, but what most people do not realize is that in terms of barrels of oil equivalent (BOE), Paki-stan is on the same level as Indonesia. PPL is close to doing 180,000 BOE per day, which is no small feat. The difference is that Pakistan has mostly a gas mix and the market is relatively close. Mr. Bokhari explains, “The rea-son is very simple: when the country came into existence, they found a huge field. For many years they thought all their needs were met, but with the population growing so fast, those needs require more energy.”

Another major E&P player is the state-owned Govern-ment Holdings PL (GHPL). It currently has more than 60 development and produc-tion leases and 50 explora-tion licenses, highlighting the extent of potential across the country and an underlying optimism in the industry.

The firm is 100% owned by the Government of Pakistan and operates under the Min-istry of Petroleum and Natural Resources, and had a manda-tory 5% interest in all explora-tion licenses granted by the government during the explo-ration phase which was to be carried by other joint venture partners. GHPL holds work-ing interest in a total of 120 joint ventures and is currently in partnership with 27 nation-al and international oil firms, making it one of the largest E&P companies in Pakistan.

Political developments are also helping to cast optimism over Pakistan’s oil and gas sec-tor, and the recent landmark nuclear deal signed between Iran and global powers could open up more possibilities for OGDCL and PPL.

With fewer Western sanc-tions, a much-discussed pipe-line between the two countries could finally come to fruition, “Iran is our neighbor, so there is a natural partnership al-ready,” Mr. Bokhari says. “They have also developed their ser-vice sector quite a bit, so open-ing the borders between these two countries will allow a big-ger participation of that sector in both regions. Our guys can work over there; their guys can work over here, so there is an advantage for both sides.”

The ambitious goals of OG-DCL see its vision go even fur-ther afield for future growth prospects. It has around $2.5 billion to invest in expand-ing the company’s reach, and Managing Director and CEO of OGDCL Zahid Mir is clear that moving out of Pakistan will be a key plank to the com-pany’s strategy.

“We want to make the company reach new levels of growth, and in order to do that, there is absolutely no other way but to go international,” he says. “Oil production in Paki-stan ranges from 60,000 bar-rels to a maximum of 110,000 barrels. When we find oil, they are small reservoirs; you keep on finding those small fields but there is no game changer.

“My opinion is that there may be a game changer if we are able to find something big offshore, but it is not happen-ing so far. So, if we want to grow from our current size we need to go international. We are looking at different places such as Africa, Kazakhstan, and Turkmenistan.”

While there is little doubt that oil price volatility is pro-viding considerable challenges to the industry – particularly for those operating in the E&P sector – Mr. Mir says his company is concentrating on a longer-term strategy and not basing its future on short-term forecasts and predictions.

“Regardless of the prices we do not stop our on-going proj-ects; we are already commit-ted and we will finish them,” he says. “But for the new ones, we try to use efficiently the exist-

ing facilities to the maximum capacity, reduce unnecessary items and costs.”

OGDCL tests each pro-spective project out against different economic scenarios and if they remain viable against a price of $40 per bar-rel – allowing the company to at least break even – they will progress.

Mr. Mir adds that while the price fall is inevitably having an impact on the sector, it is also providing opportunities by allowing companies such as his to take advantage of low devel-opment and drilling costs.

“Our cost of production is not too much, we talk about $6-7 a barrel, which means that we can survive low pric-es, but for the new projects we have to make sure that we will have an acceptable re-turn on investment. Never-theless my perception is that prices will go up, I don’t share the widespread negative out-look for the oil and gas sec-tor,” he explains.

Indeed, Pakistan’s oil and gas infrastructure is in need of substantial development and it remains a “limiting factor” ac-cording to Mr. Bokhari, mean-ing investment into the service sector has the potential of sub-stantial returns. Forging links with international groups, particularly those in the U.S., could help to propel growth, while the recent nuclear agree-ment with Iran is being seen as a game changer for the pros-pects of the Pakistani industry.

Although OGDCL is al-ready looking at investing its own money abroad, it is clear that the country’s oil and gas sector is also enticing inter-national partners, particularly from the U.S. The Pakistani government has made it clear they will consider investment in pipeline infrastructure, and Mr. Mir admits that working together on projects – includ-ing on shale gas exploration – could provide a boon for both the companies investing and Pakistan itself.

“I am very keen to work with American companies and utilize their expertise in shale gas extraction,” he says. “There is a huge oppor-tunity in Pakistan as far as shale gas is concerned. We do not have a lot of techni-cal expertise, we do not have experience, and we have got the formations so the shale is there; the gas is there and obviously Americans are ex-perts in this matter.”

While such partnerships could offer the potential for considerable returns, envi-ronmental concerns are also being addressed. OGDCL has forged agreements with Paki-stan’s government to develop local eco-friendly projects, and it has also set aside PKR 2 bil-lion on schemes that focus on developing roads, schools and hospitals. Such a strategy high-lights that despite global price volatility, Pakistan’s E&P sector remains committed to long-term growth that benefits not just its stakeholders but also the country as a whole.

Mr. Abbasi adds, “In the PML-N manifesto, we promised to address the challenge of unemployment. Using energy as a driver of economic growth, and uti-lizing indigenous resource must be on the top agenda for energy security.”

With estimated recoverable resources of 14 billion barrels of shale oil and around 95 TCF of risk recoverable free gas, Pakistan is working closely with international partners USAID and the Energy Information Administration (EIA) to boost production

USAID & EIA help to unlock Pakistan’s unconventional potential

“There is a huge opportunity in Pakistan as far as shale gas is concerned. We don’t have a lot of technical expertise, we don’t have experience, and we’ve got the formations so the shale is there, the gas is there and obviously Americans are experts in this matter.”

zAHiD MiRManaging Director and CEO, OgDCL

“Shale gas can be a real game-changer for Pakistan. The most glorious advantage of shale gas is the potential massive job opportunities for skilled and semi-skilled Pakistanis”


Government Holdings PL currently has more than 60 development and production leases and 50 exploration licenses, highlighting the extent of potential across the country and an underlying optimism in the industry

“If you work for the brave, today, there is an opportunity. In our industry, returns are after several years, it’s a long cycle. If you are willing to invest now, your investments will be substantially lower, because the costs have gone down”

SYED WAMiq BOKHARi, Managing Director and CEO, Pakistan Petroleum Limited (PPL)



Pakistan’s oil and gas industry has faced consider-able challenges over recent years

but domestic demand for energy and untapped re-sources means it’s fast be-coming a tempting market for investors. Energy short-ages in Pakistan are com-monplace and the resultant negative effect on domestic output means solutions are keenly sought by the gov-ernment, one of which is the importation of gas.

Pakistan currently has a deficit of 2 billion cubic feet (bcf ) of gas per day, rising to 2.5 bcf per day during the winter months. Unfortu-nately Pakistan cannot meet the demand for gas through domestic production; there-fore importation of natural gas is a necessity.

“We have a major deficit and so far there is a heavy reliance in imported crude oil. The idea of gas is to be able to meet the shortfall that we have,” says Khalid Rahman, Managing Direc-tor of Sui Southern Gas Company, one of the coun-

try’s leading gas utilities. “LNG (liquefied natural gas) will be a game breaker because any shortfall that you have can be solved by bringing it by vessel. LNG has to and will play a very important role in going forward.”

Aside from the impor-tation of LNG by vessel, there are a number of pipe-line projects set to come on stream that will significantly boost Pakistan’s supply of imported natural gas.

One of the most notable projects is TAPI, a 1,800 ki-lometer-long pipeline that will pass through Turkmen-istan, Afghanistan, Pakistan and India, through which to up to 33 billion cubic meters (bcm) of natural gas will be pumped per year. The pipe-line will transport Caspian Sea natural gas from Turk-menistan through Afghani-stan into Pakistan and then

to India (200 kilometers will run though Turkmeni-stan, 773 kilometers – Af-ghanistan, 827 kilometers – Pakistan). Proponents of the project say it will form a vital part of the establish-ment of the modern Silk Road, which was once an ancient network of trade routes through the Asian continent connecting the West and East.

The project will cost around $10 billion and is being developed and partly funded by the Asian Development Bank. It was recently reported that the bank will not limit itself to funding, but will ren-der assistance in attracting the credit sides, as well as take part in the coordina-tion of the work to attract other interested funders and investors.

TAPI, which is also being supported by the United

States, was first conceived in the 1990s. It has long suffered from delays, but in September Turkmeni-stan government officials said that building work would finally begin in De-cember. Pakistan’s Prime Minister Nawaz Sharif told a meeting of business leaders in Islamabad that he would travel to Turk-menistan in December for the project’s inauguration ceremony, adding that it would take just four years to complete. The prime minister has hailed TAPI as a game changer that would help to spur greater regional integration.

Another game changer for Pakistan will be the Iran–Pakistan (IP) gas pipeline, also known as the Peace Pipeline, which will deliver natural gas from Iranian fields to Pakistan. Like TAPI, the 2,775 kilo-meter-long IP pipeline has long been delayed, but the changing geopolitical land-scape that will lead to the removal of sanctions on Iran will pave the way for construction of the project to finally begin.

“We need gas. Iran has the world’s second-largest gas reserves,” Pakistan’s Minister of Petroleum Sha-hid Khaqan Abbasi has stat-ed. By 2020, the minister predicts that the IP pipeline will provide Pakistan with a peak of 750 million cubic feet of gas per day (mmcfd), equating to $2.5bn annually at current prices.

Construction of 700 kilo-meters of the pipeline from Gwadar to Nawabshah, the main part of Pakistan side of the project will be man-aged by a reputed Chinese firm. The remaining 80 kilo-meters of the pipeline from Gwadar to the Iranian bor-der will be built by two Paki-stani companies, Sui North-ern Gas Pipelines Limited (SNGPL) and SSGC. Ac-cording to Mr. Abbasi, con-struction will begin within six months, with the proj-ect due for completion by December 2017.

“Sanctions are still in place and investors are worried that even after removal of sanctions, still there is pos-sibility of sanctions coming back because of different le-gal issues,” Mr. Abbasi said in a recent interview. “But we are working on it. There is no serious problem and we are going ahead with the pipeline from Gwadar to Nawabshah.

“We have requested a meeting with Iranian oil minister to inform him about the latest IP develop-ments. We are also look-ing for more cooperation in post-sanctions era with Iran. Holding a meeting with Iranian oil minister at this time is important.

“Based on the IP con-tract, the basic price (of gas) is agreed but it was also agreed that one year before the first gas flow, the two parties will sit to-gether and negotiate the final price based upon the market realities.”

Once operational, the IP and TAPI pipelines will offer a significant boost to Pakistan’s gas utility com-panies struggling to keep up with rising demand. One such company is SNG-PL, the country’s largest integrated gas company, which today serves more than 4.9 million consum-ers in North Central Paki-stan, through an extensive network in Punjab, Khyber Pakhtoonkhwa, Azad Jam-mu and Kashmir.

Chief Executive and Managing Director Uzma Adil Khan admits that the company currently cannot keep up with demand in the region (which in winter months can exceed 3 bcf ), particularly in Punjab prov-ince, where the utility com-pany is forced to carry out a gas rationing plan. But the IP pipeline and TAPI could change all that.

“SNGPL is hopeful that long delayed IP pipeline will now become a reality since the landmark nuclear deal between Iran and global powers will help remove western sanctions. SNGPL is likely to get an additional 500 mmcfd from IP in the beginning, which will be ramped up to 700 mmcfd,” says Ms. Khan.

In addition, SNGPL is also looking forward to the al-location of 994 mmcfd, or 75 per cent of gas imported through the TAPI pipe-line, most of which will be pumped into Punjab prov-ince to help it overcome the severe energy crisis.

SNGPL is also laying a 762 kilometer-long pipe-line network at a cost of PKR 57 billion ($ 546 mil-lion). “This pipeline project will ensure the timely im-port of RLNG (re gasified liquefied natural gas) into our system from Karachi. This will definitely reduce our fuel bill since RLNG will be cheaper than diesel,”

says Ms. Khan, who con-tinues by sharing her op-timism for the future – an optimism fueled by these pipeline projects coming on stream.

“I feel that the govern-ment and SNGPL will work in harmony and make a joint leap forward in re-spect to attaining the ul-timate goal of delivery of uninterrupted supply to our gas consumers,” she says. “The IP project for 700 mmcfd of gas coupled with the 1.2 billion cubic feet per day of RLNG that SNGPL will receive are likely to materialize in the short term. This will also be beefed up in the medi-um term by the import of gas through the TAPI proj-ect. The government will also be laying the North-South pipeline for meeting the energy requirement of the country.”

The North-South gas pipeline will spread over 1,100 km and is due for be completion by March 2017 at a cost of $2 billion. In April, Pakistan and Rus-sia finalized a $2-billion energy deal for laying the LNG pipeline from Karachi to Lahore. Russia’s Minis-try of Energy and Pakistan’s Ministry of Petroleum and Natural Resources will su-pervise and coordinate the implementation of the North-South Gas Pipeline Project. Russia has also ex-pressed interest in support-ing the IP pipeline.

While SNGPL will receive 994 mmcfd of gas imported through the TAPI pipeline, the remaining 331 mmcfd, or 25%, will be allocated to SSGC. Like SNGPL, SSGC also has its own pipeline project in the works. Its 358-kilometre network of pipelines, with a diameter of 42 inches, will be completed at a cost of Rs44 billion.

“We have already started to work on various pro-grams and the first one is this pipeline, from Karachi to Sawan, where there is a connecting point to trans-mit gas to SNGPL system,” explains SSGC managing director, Mr. Rahman.

SSGC’s transmission sys-tem extends throughout Southern Pakistan, from Sui in Balochistan to Kara-chi in Sindh, covering over 1200 towns in the Sindh and Balochistan. And the company is very involved in the communities in which it operates through its cor-porate social responsibility (CSR) programs.

“If you really want your business to be sustainable you have to engage com-munities,” says Mr Rahman. “We are making a better life for them, not in a giveaway model, but really creating new opportunities with programs such as develop-ment of schools, orphan-ages, scholarships etc. We need to respect the under-privileged to the maximum and that´s where our CSR program comes in.”

In terms of helping com-panies like SSGC and SNG-PL move forward, where can U.S. investors come in?

“The biggest issue we have is technology and that’s something where interna-tional expertise, specifically from the U.S., can be of great help,” Mr. Rahman replies.

“We need to find new ways to make technology work in our favor and help us overcome our challenges. There are a lot of opportu-nities for transmission and distribution in Pakistan and coming into the market as a JV (joint venture) partner for companies such as SSGC or SNGPL. That will support our business going forward and bring the partner very attractive opportunities.”

Huge gas supply boosts in the pipeline The landmark TAPI pipeline and Iran-Pakistan pipeline, which, after a long delay, now looks set to go ahead thanks to the removal of sanctions on Iran, will help Pakistan’s gas utility companies, Sui Northern Gas Pipelines Limited and Southern Gas Company, cope with rising demand for natural gas

Pakistan’s oil and gas infrastructure is in need of substantial development

“I feel that the government and SNGPL will work in harmony and make a joint leap forward in respect to attaining the ultimate goal of delivery of uninterrupted supply to our gas consumers”

UzMA ADiL KHAN, CEO and MD, SNgPL

“There are a lot of opportunities for transmission and distribution in Pakistan and coming into the market as a JV (joint venture) partner for companies such as SSGC or SNGPL. That will support our business going forward and bring the partner very attractive opportunities”

KHALiD RAHMAN, Managing Director, SSgC

“Sanctions are still in place and investors are worried that even after removal of sanctions, still there is possibility of sanctions coming back because of different legal issues. But we are working on it (the Iran-Pakistan pipeline). There is no serious problem and we are going ahead with the pipeline from Gwader to Nawabshah”

SHAHiD KHAqAN ABBASi, Minister of Petroleum

Pakistan currently has a deficit of 2 billion cubic feet (bcf) of gas per day, rising to 2.5 bcf per day during the winter months. Unfortunately Pakistan cannot meet the demand for gas through domestic production; therefore importation of natural gas is a necessity.


15Thursday, October 22, 2015Distributed by USA TODAY PAKISTANPAkISTAN’S ENERgY MIX

35%

46.2%

11.4%

5.4% 2%

6% 7%

1%

1%

3%

PAKISTAN

USA

WORLD

Hydro

Nuclear

Coal

Gas

Coal

Oil

Renewable

Gas

Hydro

Nuclear

Oil

Oil

Gas

Nuclear

Coal

Renewable

Hydro

19%

27%

39%

41%

21%6%

13%

16%

Other gases

CountryShale oil

(billion barrels)Shale gas

(trillion cubic feet)

75285

862

Russia

58U.S.

321275China

13681Mexico

1495Pakistan

846Indonesia

SHALE IN PAKISTANAccording to the shale gas study done under the USAID Energy Policy Program, Pakistan has tremendous shale gas/oil resources

in the middle-lower Indus basin alone. The risked recoverable free gas is estimated at 95 TCF with significant upside from the adsorbed gas in place estimated at over 6,300 TCF. The same study has confirmed that the middle-lower Indus basin has

approximately 14 billion barrels of risked recoverable oil in place

LNg: LIQUEFACTION CAPACITY

2014 2020 Utilisation, 2014 (top axis)

ANNUAL CONSUMPTION OF DIESEL, PETROL AND FOREIGN RESERVES 2015

$20.05 billion USD 7.2 million

tons

DIESEL 2FOREIGN RESERVES 1

4.8 million tons

PETROL 2

2 SoURCE: Min. of Petrol1 SoURCE: State Bank of Pakistan

Qatar

Algeria

0

0%

20 40 60 80 MTPA

3 Projected demand

120%

Australia

USA

Pakistan 3



One of the ma-in challenges Pakistan’s eco-nomy faces to-day is power

supply. Prime Minister NawazSharif ’s government has said that it plans to improve Paki-stan’s power sector through reform and investment to boost growth, and hopes to end chronic power short-ages that have crippled the economy for years. So, it has made real strides to tackle this issue head on.

Federal Minister for Fi-nance Ishaq Dar has been praised for undertaking structural reforms to cre-ate an investment friendly environment, especially in the energy, infrastruc-ture development, large-scale manufacturing and agricultural sectors. The showpiece of this policy is the Integrated Energy Plan, which aims to achieve self-sufficiency by generating 50,000 megawatts (MW) of power within the next 25 years.

While addressing the recent National Energy Conference on Prospects of Power Generation, or-ganized by South Asian Strategic Institute Univer-sity in Islamabad, Minister of Water & Power Kha-waja Muhammad Asif said that to develop a concrete road map for a secure en-ergy vision for the future, the nation must work at developing indigenous sci-entific and industrial ca-pacities to explore domestic energy reserves.

“The government is mak-ing every effort to increase electricity supply to the national grid through all possible avenues, private sector being one of them,” said Mr. Asif.

He also explained that the geographical position of Pakistan not only makes it a potential energy ex-porter, but also a trade and energy corridor for South and Central Asia. And due to this advantage, Paki-stan can maneuver itself in a way that significantly increases its bargaining power in the region and beyond, thus signifying the importance of the reform of the sector.

Key to the success of this policy is energy diversifica-tion. The aim is to maxi-mize the use of indigenous resources to achieve a more diversified energy mix (hydel 20%, coal 15%, LPG 2%, nuclear 3%, renewable 12%, domestic gas 21%, im-ported gas 7%, oil 20%).

As President and CEO of General Electric (GE) Pakistan, Sarim Sheikh, recently noted, “Pakistan’s

energy started developing mainly with hydro. Then they diversified into gas and in the late 90s, they invested quite heavily on heavy fuel oil as a source of power. I think what Paki-stan needs to do is to con-tinue to diversify its energy needs and also, particular-ly, to keep an eye on energy security and cost.”

Much progress towards this goal has already been made, with the Pakistan’s Ambassador to the U.S. Jalil Abbas Jilani recently quoted as saying: “I have no doubt that by 2017, we will not only be able to overcome the energy shortfalls, but also we will have surplus energy, as we’re going to add about 10,000 MW of power in the national grid.”

Indeed, U.S.-Pakistani relations are vital to the success of this develop-ment. When Mr. Dar met with U.S. Under Secretary of State Catherine Novelli they both agreed that en-ergy remains the vital area that holds immense po-tential for enhanced co-operation. The U.S. has continuously stressed the importance of continuing to build momentum on ex-panded trade, investment and economic cooperation with Pakistan.

“We are grateful to the United States for the eco-nomic cooperation as well as its assistance in the en-ergy sector. Pakistan-U.S. cooperation in the energy sector has added 1400MW of electricity to our na-tional grid. The U.S. is also supporting large hydro-electric projects like Dasu and Diamir Bhasha dams, initiated by Pakistan,” Mr. Jilani has stated.

U.S. firms, namely GE Pakistan, have had a huge role to play in the Pakistani energy revolution. As the Chairman of the Pakistan’s Board of Investment, Dr. Miftah Ismail, says: “Some companies that are already present in the country are doing a great job, such as GE. A third of all power generation in Pakistan comes through GE tur-bines. The U.S. obviously has unbeatable technol-ogy, therefore we want to use their expertise.” The relationship is amicable on both sides, with GE more than happy to assist the de-velopment of the Pakistani energy sector.

“We are proud to have been a partner of Pakistan in its development story; we have been involved in building dams, we have been involved in gas pow-er plants, so almost a third

of Pakistan’s power is gen-erated using GE technol-ogy,” said Mr. Sheikh at a recent conference.

GE established its roots in Pakistan with the coun-try’s independence and has had a direct presence through its subsidiaries since 1980. GE has ex-panded its portfolio to sup-port other GE businesses in addition to GE Power Systems (now GE Infra-structure Energy) located at Lahore, and has since been working actively with national companies and private businesses. Today, GE is a key player in sup-porting the development of the power sector, hav-ing signed a Memorandum of Understanding (MoU) to develop Pakistan’s en-ergy resources to meet the projected demand of 54,000MW by 2020.

In May 2015, GE reit-erated its commitment to Pakistan when a high-level business delegation representing GE and M/s American Ethane Com-pany visited Islamabad to show interest in setting up a new 6000MW eth-ane gas power plant in the country. Ethane – a smart, cost-effective and environ-ment friendly fuel – burns up to 80% fewer emissions as compared to oil & coal and is suitable especially for areas not served by natural gas lines. Along with American Ethane, GE Pakistan is now consider-ing setting up the large scale plant in order to help Pakistan further reduce its energy deficit.

The announcement comes on the back of a MoU that GE signed last year with Pakistani firm Sapphire Electric Company Limited. The MoU is for the creation of ‘GE Predictiv-ity’ solutions that will play an integral role in deliver-ing more power to Pakistan, and help close a gap be-tween the country’s power capacity and ongoing elec-tricity demand.

GE explained in its press release: ‘Predictivity solu-tions combine the power of the company’s connected machines network, data analytics and people at work to help power genera-tors manage their plant fa-cilities more productively, and make well-informed operational decisions. The MoU is part of GE’s stra-tegic partnership approach to co-create tailored solu-tions that will increase the plant’s (Muridke Power Station) output.’

“We are proud to strengthen our partner-ship with Sapphire Elec-tric Company through this important agreement, which will help drive more momentum in expanding Pakistan’s power genera-

tion capacity,” said Azeez Mohammed, CEO and President of GE Power and Generation Services (Middle East and Africa). “Strengthening its energy sector capacity is crucial to meet the growing de-mand for power in Paki-stan. It also highlights the capabilities of our Power Generation Services busi-ness to provide smarter, cleaner and more efficient solutions to our custom-ers, and the communities they serve.”

Aside from the American multinational, the recent privatization of domestic energy firms also marks a huge step toward the Paki-stani energy challenge; with the privatization of Hubco and K-Electric Limited dra-matically improving the ef-ficiency of both firms.

For instance, since it was taken over by Pakistani in-vestor Hussain Dawood in 2012, Hubco’s (Hub Power Company Limited) profits have soared. In the fiscal year ending June 2015, Hub-co recorded a 50% growth in net profit, while its gross profit margin at 11% was one its highest ever. Fur-thermore, in January 2015, Hubco announced it would set up 1320MW coal-based power plants next to its thermal power station in Balochistan and gradually enhance coal based genera-tion to 3600MW.

Meanwhile, K-Electric (KE) – Pakistan’s only ver-tically integrated power utility – has also turned its fortunes around since it was privatized in 2005 and taken over by UAE’s Abraaj Capital three years later. Since then, the company has enhanced its genera-tion capacity by 1037MW through the addition of four new power plants and a steam turbine, and in FY2014-2015 its tax profit stood at PKR28,325 million ($271 million).

“We had to change the mindset of our workers from a public sector institution to a private one,” explains CEO of KE, Tayyab Tareen. “$1.2 billion has been invested in the company and both the distribution and transmis-sion capacity has improved to bridge the gap between the demand and supply of electricity. Our privatization stands as a success case and has helped the company get back on the track of growth.”

“K-Electric’s turnaround from a loss-making entity into a profitable one is a story of sustained optimism and unwavering determina-tion that set a benchmark for state-run power entities in the country,” adds Chair-man Tabish Gauhar.

KE – formerly known as Karachi Electric Supply Company Limited (KESC) – manages the generation, transmission and distribu-tion of electricity to Kara-chi, and in doing so lights up one of the most popu-lous cities in the world (20 million people).

“Karachi was once con-sidered the city of lights and we want to restore that pride back,” says CEO Mr. Tareen. “I believe that through the transformation our company is achieving we are changing people’s lives and lifestyle.”

Today the company cov-ers an area of over 6,500 square kilometers and pro-vides electricity to all the industrial, commercial, agricultural and residen-tial areas that come under its network, which totals a number of more than 2.2 million customers in Kara-chi and in the nearby towns of Dhabeji and Gharo in Sindh and Hub, Uthal, Vin-dar and Bela in Balochistan.

Having demonstrated a strong ability to bring about a sustainable change, the company has followed a path of growth and trans-formation, in turn placing itself amongst the most dy-namic institutions in Paki-stan and in the South Asia region. “We will ensure we keep the ‘lights on’ and we will improve our perfor-mance to provide the en-ergy that Pakistan needs to grow,” says Mr. Tareen.

This sentiment was re-affirmed last month when KEL announced a deal for a coal-fired power plant, signing a Joint Develop-

ment Agreement, with the China Datang Over-seas Investment Com-pany (CDTO) and China Machinery Company (CMEC), for the develop-ment of a 700-MW project at Port Qasim.

“KE is developing new generation projects and is giving them the high-est priority. This particular project will go a long way in addressing the power needs of the country, specifically the people of Karachi,” said Mr. Tareen, commenting af-ter the three parties issued a statement in September. The statement declared that “considerable progress” had been made on the project during the last few months and that the agreement was a major step forward to-wards the finalization of the flagship project.

The project is set to bring in an investment of over $1 billion to Pakistan, not only helping the country to diversify its fuel mix, but lower generation costs as well, ultimately benefiting the end consumer. Going forward, KE is set to invest further in the future of Pak-istan with the realization of even more power projects. “An LNG (Liquid Natural Gas) based power project of around 225MW is in the works. We believe LNG can be an effective tool to over-come energy shortages,” says Mr. Tareen.

Should progress in the energy sector in Pakistan continue at its current pace – in no short thanks to the continued invest-ment of companies such as K-Electric – there is no doubt Pakistan will remain well on its way to achieving the ambitious energy goals. Such goals are so important not only on a domestic level in terms of Pakistani energy use, but also on an interna-tional level as the country looks set to gain massively from the excess electrical capacity which will be de-veloped in coming years.

Pakistan’s power sector has hampered growth for many years. The combination of new government initiatives, a revitalized private energy sector and cooperation with international partners – namely the U.S. – is going a long way to not only deal with the issues that Pakistan faces, but also to make it one of the most dynamic and geopolitically important energy players in the world

Privatization and U.S. support put Pakistan on track towards 50,000 MW goal

“The government is making every effort to increase electricity supply to the national grid through all possible avenues, private sector being one of them.”

KHAWAJA MUHAMMAD ASif, Minister of Water and Power

“$1.2 billion has been invested in the company and both the distribution and transmission capacity has improved to bridge the gap between the demand and supply of electricity. Our privatization stands as a success case and has helped the company get back on the track of growth”

TAYYAB TAREEN,CEO of K-Electric Limited

Sarim Sheikh, CEO and President of gE Pakistan

“I have no doubt that by 2017, we will not only be able to overcome the energy shortfalls, but also we will have surplus energy, as we’re going to add about 10,000 MW of power in the national grid”

JALiL ABBAS JiLANi, Pakistan Ambassador to the U.S.

“I think what Pakistan needs to do is to continue to diversify its energy needs and also, particularly, keep an eye on energy security and cost”

SARiM SHEiKH, CEO and President, gE Pakistan



Pakistan has faced severe and repeat-ed energy short-ages that have left rural areas with-

out power for up to 20 hours a day, and have even forced local factories to close down due to highly diminished out-put. This is largely because at present, 87% of the country’s energy comes from hydrocar-bons such as imported coal, oil, and gas – a dependence which Pakistani energy offi-cials hope to reduce to 60% by 2025 through the use of alter-native energy sources.

Although Pakistan cur-rently generates only 1-2% of its energy from renewable energy sources, it is commit-ted to making solar and wind energy a larger component of its future power bank. The Pakistani Federal Minister for Water and Power, Khawa-ja Muhammad Asif, recently affirmed that the govern-ment welcomes renewable energy projects. “Pakistan offers good opportunities for investment in renewable en-ergy as the country is blessed with vast natural resources,” he told Sabah News. Follow-ing talks in early September with a delegation from Zorlu Energy Pvt Limited – the largest solar company in Turkey – it was announced that Zurlo would make a 200 megawatt (MW) investment in solar power and a 100MW investment in wind power.

Likewise, in a recent meet-ing between Donald Sampler Jr,the acting assistant to US-AID for Afghanistan and Pak-istan, and the Pakistani Min-

ister of Finance, Mohammad Ishaq Dar, the U.S. renewed its support of the Diamer Bhasha Dam – a gravity dam on the Indus River, which upon completion will be the highest roller compacted concrete dam in the world. It will produce 4,500MW of electricity through hydro-power generation and store 10.5km3 of water for irriga-tion and drinking, in addition to helping control for flood damage. While the U.S. has already offered $250 million in assistance, in further sup-port of this project and paral-lel opportunities, USAID also pledged its support for help-ing to improve governance in the power sector by announc-ing plans to hold a conference highlighting investment pos-sibilities in Pakistan’s renew-able energy sector.

A New Silk Road?“Even though we are strength-ening our relationship with China, the meaningful num-bers still come from USA,” said the Pakistani Minister for Privatization & Chairman of the Privatization Commis-sion of Pakistan, Mohammad Zubair. “USA delegations are constantly coming to visit us as well and this is extremely important, especially in the energy sector.”

Indeed, while the US still provides solid support when it comes to furthering the use of renewable energy in Paki-stan, China has also pitched in to help build the world’s largest solar farm in the Punjabi desert – a 100 MW, 400,000-panel pilot power

project known as Quaid-e-Azam Solar Power Park (QASP), the first solar power plant ever built in Pakistan. Spread over almost 500 acres of land and completed for $130 million in just three months after the Chinese company, Xinjiang Sunoasis, took the construction reins, it is the first installment of a $46 billion China-Pakistan Economic Corridor project. Linking Pakistan to China’s western region of Xinjiang through a new “silk road,” the project is predicted to become the world’s largest solar farm by 2017, with 5.2 million photovoltaic cells producing enough electric-ity to power 320,000 homes.

As Najam Ahmed Shah, the chief executive officer of QASP recently announced, the solar park will also shrink Pakistan’s carbon footprint by displacing about 57,500 tonnes of coal burn and re-ducing emissions by 90,750 tonnes every year.

To encourage and facilitate the transparency of projects in a similar vein, Pakistan’s energy regulator, the National Electric Power Regulatory Authority (NEPRA), has re-cently approved net metering schemes for solar and wind generation of up to 1MW. Under this system, NEPRA will grant generation licenses to solar and wind system owners after inspecting and approving their equipment.

As far as eolic power goes, Pakistan also has an impres-sive lineup of projects in the pipeline. The country’s first wind park was commis-sioned in 2012 and offers 49.5 MW of capacity drawn from 33 1.5MW Nordex tur-bines. Since 2012, Pakistan has added several more wind

projects to its repertoire, in-cluding a 50MW wind farm at the Ghoro-Keti Bandar which received $95 million in financing from the U.S. Overseas Private Investment Corporation (OPIC). Known as the Sapphire wind farm, it uses 33 General Electric (GE) turbines.

“I think energy is evolv-ing and the main thing is to diversify, to try and focus on getting more indepen-dence rather than growing dependent on imports,” said Sarim Sheikh, the CEO and President of GE Pakistan. He underscores the importance of using energy that can be sought through the use of re-newables and indigenous or neighboring sources; a senti-ment largely echoed by Am-jad Ali Awansaid, the CEO of Pakistan’s Alternative Energy Development Board (AEDB).

AEDB has been a strong proponent of the develop-ment of Pakistan’s wind pow-er sector, and while grateful for the support of institu-tions like the International

Development Bank (IDB) and the Asian Development Bank (ADB), there are hopes to continue facilitating new projects that will also more fully engage the private sec-tor. “The government is supporting investors and developers through various incentives and has removed certain challenges such as making land accessible and aligning project develop-ment with grid capacity,” said Mr. Awansaid at a recent event held in London to pro-mote new opportunities in the renewable energy sector. “We have a shared vision and a commitment to developing a clean energy regime.”

While renewables currently only generate 1-2% of the country’s energy, Pakistan is committed to using more solar and wind sources to reduce its dependence on hydrocarbons

Renewables to reduce hydrocarbon use by more than 25% by 2025

“Pakistan offers good opportunities for investment in renewable energy as the country is blessed with vast natural resources”

KHAWAJA MUHAMMAD ASif,federal Minister for Water and Power

“I think energy is evolving and the main thing is to diversify, to try and focus on getting more independence rather than growing dependent on imports”

SARiM SHEiKH, CEO and President, gE Pakistan



Education improvements boost competitiveness

A mong the am-bitious goals that Pakistan’s Prime Min-ister, Nawaz

Sharif, has set for his coun-try, a strong focus on the accessibility and quality of education is top of the list. Access to higher education is expected to increase to 12% over the next decade, while the number of PhD holders in Pakistan will more than double, from 7,000 to 15,000. Plans are also afoot to make vocation-al training more responsive to emerging technologies and to the changing needs of the private sector.

The prime minister’s plan, called Vision 2025, also calls for the promo-tion of improvement in the quality of science and technology education, two areas in which the country’s educational in-stitutions are already quite strong. Pakistan is among the top 10 countries in the world for its number of scientists and engineers, according to Engineer Mu-hammad Asghar, Rector of the National University of Science and Technology (NUST) in Islamabad.

Mr. Asghar gives much of the credit to the Higher Education Commission (HEC), established in 2002. “After its establishment, HEC promoted the re-search culture and valued creativity. The research and creativity which were never given importance in the past have now become so indispensable that one can-not survive in the university without it,” he says. “More-over HEC emphasizes on the quality and relevance of our education and believes in increasing the access to education for all.” The commission, he adds, “be-lieves in increasing access to higher education… [the rate] was 2.6% in 2002 and is about 10% today of the uni-versity-aged population.”

To date Pakistan has lagged behind regional peers in taking advantage of the new growth oppor-tunities created by techno-logical advances, particu-larly in ICT. But many of the foundational factors are in place now to seize the opportunity going forward. Increased investment in higher education has creat-ed an opportunity to lever-age science and technology for a knowledge economy. As part of its vision, the government aims that ev-ery school, college and uni-versity will be digitized and computerized by 2025.

NUST is an example of the success experienced by higher education institu-tions in Pakistan in recent years. When Mr. Asghar became the rector eight years ago, the student pop-

ulation was 5,900; today, it is more than 15,000. The university admits students based on merit alone, which gives the student population a mix of qual-ity from all socioeconomic classes. “We select one out of every 35 candidates, and they are the best of the best,” Mr. Asghar shares.

Just 24 years old, the uni-versity is often recognized for the quality of its edu-cation. Q/S Quacquarelli Symonds, a UK-based ranking agency, recently named NUST among the top 500 world universities. It is the only Pakistani uni-versity to be consistently placed on this list since 2007. It is ranked among the top 120 universities in Asia, and among the top 100 universities from 22 developing nations.

COMSATS Institute of Information Technology is another higher educa-tion success in Pakistan. It opened in 2000 in Is-lamabad with just 320 stu-dents, but today has 40,000 students and 3,500 faculty members across eight cam-puses, with plans in devel-opment for starting a dis-tance education program via a virtual campus.

One of the institute’s ar-eas of focus is improving its professors’ education. Around 1200 of its faculty members have PhDs, and the institute expects to one-day reach 6000 PhDs, so it is turning to a global approach to educating its faculty. According to Jun-aid Zaidi, the Founder Rec-tor of COMSATS, “We are looking towards the devel-oped and advanced coun-tries to train our people, either in Pakistan or in an advanced country like the USA, Canada, the UK, and all European countries.”

While Mr. Zaidi recog-nizes some of Pakistan’s cur-rent limitations in its prod-uct output, he knows that higher education is the key to improvement: “We have started producing skilled graduates, and I am very op-timistic that in the next five years, the situation will dra-matically change.”

Partnerships with U.S. institutionsThe U.S. is partnering with Pakistan in number of ar-eas to support its economic

development, and indeed bilateral cooperation in education is key to this partnership. In June, it was announced that four Paki-stani and three U.S. univer-sities would collaborate on a research project called Center for Advanced Stud-ies (CAS) in order to find innovative solutions to wa-ter, agriculture and energy challenges for Pakistan.

The United Stated Agen-cy for International Devel-opment (USAID) and the HEC are investing $127 mil-lion in the project, which will train about a thousand graduates in education, business and governance by applying research solutions in the water, power and ag-riculture sectors.

NUST will participate in the energy department of CAS, along with the Uni-versity of Engineering and Technology, Peshawar and Arizona State University. Other participating univer-sities include the University of Agriculture, Faisalabad and the University of Cali-fornia, Davis in the agricul-ture sector, while Mehran University of Engineering and Technology, Jamshoro and the University of Utah will collaborate on finding solutions to challenges in the water sector.

Speaking about the U.S.-Pakistani education partnership, Mr Asghar says, “Pakistan has been a longtime ally of the U.S. and that gave us the op-portunity to benefit from that educational system in the past. And we don’t have any second opinion about USA’s education be-ing the best one.

“Therefore, we would like to benefit from this leading system. We have visited U.S. many a times and our obser-vation is that at the individ-ual level, excluding politics, Americans are friendly and very good human beings. At the same time Pakistanis also possess the same traits. Hence they study and work together in a very conducive environment. In engineer-ing and technology we fol-low the U.S. system.”

Education, one of the central concerns of Pakistan’s Vision 2025 plan, is becoming more accessible to population, and higher education in particular is moving the country forward in science and technology

“We are looking towards the developed and advanced countries to train our people, either in Pakistan or in an advanced country like the USA, Canada, the Uk, and all European countries”

JUNAiD zAiDifounding Rector, COMSATS institute of information Technology

“[The Higher Education Commission] believes in increasing access to higher education… [the rate] was 2.6% in 2002 and is about 10% today of the university-aged population”

MUHAMMAD ASgHAR,Rector of the National University of Science and Technology (NUST)

National University of Science and Technology, islamabad



For far too long, Paki-stan has been a vic-tim of what Mr. Aziz Boolani calls “the narrative” -- where

the media does not depict the true reflection of the country. You almost never hear about its cultural treasures, natural wonders, traditional hospi-tality and steadily improving macroeconomic indicators. Serena Hotels aim to project a country making every effort to secure the well-being of its people, adds Mr. Boolani, who as CEO of the Serena Hotels, South and Central Asia wants to make sure the other side of the story gets told.

“Serena Hotels’ philosophy is to promote and project the cultural values and heritage of the countries where they

are located. We make sure that a stay with us is a pillar of our guests’ experience in Pakistan. What they see gets registered in their minds and when they get home they say ‘I had this great experience in Pakistan’ or ‘The people were fantastic’. Our Hotels’ interiors and operating style also reflect and transmit lo-cal traditions and culture; this makes us different from other hotel chains.”

A glance around the public areas, guest rooms, terraced gardens and grounds of the five-star Islamabad Serena Hotel attests to the company’s participation in Pakistan’s cultural outreach initiatives. The eye is held entranced by its Islamic-inspired architec-ture, the opulent detail of its lacquered furniture and deco-rative screens, all the work of traditional craftsmen and skilled artisans.

“Nothing but Pakistan” is Mr. Boolani’s mission state-ment as well as his personal motto. “As soon as you walk into the lobby you see the beautifully laid Pakistani mar-ble and the wooden Mashra-bia, crafted by the Pakistani artisans. “The ceilings are hand painted by Pakistani art-ists. Our SerenArts Program showcases talented Pakistani artist’s work and provides them with a platform to con-nect with the right audiences.”

But the success of the lo-cal approach is best reflected in the personalized treatment guests receive from hotel staff, an aspect that has been widely praised in social media. The Hotels have an extensive train-ing and mentorship program for all associates aimed at in-creasing and honing their skill set. These training programs also have important benefits for local communities.

Corporate social responsi-bility is high on Serena Hotels list of priorities, and the Hotels

are proud of their Cultural and Sports Diplomacy Initiatives operating under the banner of the Serena Environmental and Educational Development Pro-gram (SEED). The Initiatives aim to connect communities with each other. During their ‘Spirit of Compassion’ cam-paign, Serena Hotels in Paki-stan contributed double the amount of funds collected from the restaurant’s guests and do-nated towards the relief efforts for those affected by the coun-try’s monsoon floods in 2015.

Serena Hotels are particu-larly proud of their role in forming the Adventure Diplo-macy Group (ADG), in which Serena Hotels and the Ambas-sadors of the United States of America, Nepal, Indonesia, the Russian Federation and the Argentine Republic, spon-sored the young Pakistani climber Samina Ali Baig, in her bid to become the first fe-male mountaineer to reach the seven highest summits on the seven continents. The Adven-

ture Diplomacy Initiative set a world record for Pakistan.

Located near the cool Mar-galla Hills adjacent to the diplo-matic compound, the Islamabad Serena Hotel offers a full range of spas, fitness centers, banquet halls, meeting and conference facilities that draw on state of the art technology, not to mention nine different outlets special-izing in Asian, Middle Eastern and Continental cuisines.

Pakistan is not widely known for its luxury tourism, but hotels such as those owned by the Serena Hotel Group are changing all that

World-class hotels tell ‘the other side of the story’

P Pakistan’s economy has experienced some significant is-sues in the recent past, but thanks to

several factors, including gov-ernment-led changes in pricingand taxes and increased inter-national investment, strong growth is expected in some of the country’s leading in-dustries, including textiles, telecommunications, automo-biles, and pharmaceuticals.

Textile ManufacturingTextile manufacturing is the mainstay of Pakistan’s economy, which isn’t surpris-ing considering the country is the world’s fourth largest producer of cotton, the third largest yarn producer, and the third largest consumer of cotton. The value chain in textiles is made up of 10 industrial sub-sectors, and all of these sectors are in-terdependent: the finished product from one sub-sector becomes the raw material for the next sub-sector. It begins with cotton growth and pick-ing, then on to ginning, spin-ning, weaving, knitting, pro-cessing, and stitching.

The industry employs more than 10 million people, which is 40% of the industrial labor force, throughout the produc-tion and processing stages. It receives about 40% of the banking credit extended to the country’s manufacturing sec-tor. And textile manufacturing accounts for around 8% of the country’s GDP and more than 50% of its exports value.

In addition, it generates bil-lions of dollars in economic activity, a sum that has been increasing over the last year or so. In August 2015, textile exports recorded double-digit growth of 11.24% compared to the same time one year ago. While August 2014’s total was $889 million, August 2015’s total was $1.02 billion, due to a substantial increase in pro-ceeds from cotton cloth, raw cotton, bed linens, yarn, and ready-made garments.

The industry does face challenges. Other countries, like Bangladesh, can earn greater profits than Pakistan through importing Pakistani cotton and then re-export-ing it after processing it and making final retail products. While farmers in other coun-tries have received subsidies, Pakistan’s farmers have not, which has resulted in dis-torted prices. The sector also grapples with a lack of skilled

human resources and a low employment rate of women in the garment sector.

The industry does face chal-lenges. Other countries, like Bangladesh, can earn greater profits than Pakistan through importing Pakistani cotton and then re-exporting it after processing it and making final retail products. While farm-ers in other countries have received subsidies, Pakistan’s farmers have not, which has resulted in distorted prices. The sector also grapples with a lack of skilled human resourc-es and a low employment rate of women in the garment sec-tor. Information technology is under-utilized and inventory control systems are generally poor. Worldwide, the textile industry’s focus is shifting more towards manmade fi-bers, rather than natural fibers, while Pakistan’s industry uses mainly cotton.

Infrastructure is another major area of concern, as it is problematic or even absent in some areas. For example, in the Punjab region, where around 65% of the country’s indus-trial units are located, energy supplies in the area are un-predictable. The physical and institutional infrastructures at sea and dry ports need a over-haul. The legal infrastructure is redundant in many places, with numerous parallel and overlapping regulations that only increase production and management costs.

The Pakistani government recognizes the many areas are in need of improvement, and it has committed to building up the industry via its Textiles Policy 2014-19, which contains a generous financial package of PKR64.15 billion ($613 mil-lion). The extensive policy has a few central elements that are particularly noteworthy. Some of this money is set aside for workers’ skill development, textile exhibitions, and major textile awards. One of the pol-icy’s goals is to double textiles exports, boost exports to $26 billion, and create three million more jobs by 2019.

The Federal Textile Board has been restructured to better address and resolve the issues

that the industry faces, with the majority of members now from the private sector. Ad-ditionally, for 2015-2016, the custom duty assessed on eli-gible textile machinery is zero, which should enable business-es to better afford purchases that can increase or streamline their productions.

The Ministry of Textile In-dustry also seeks to help via initiatives that involve many government ministries and divisions, including Finance, Petroleum and Natural Re-sources, and Commerce. The Climate Change Division is working on helping cotton producers meet buyers’ desire for “Better Cotton,” an initia-tive that trains farmers to re-duce their use of pesticides, water, and fertilizer. By 2020, 30% of the world’s consumed cotton will come from “Better Cotton” farms, and Pakistan wants its farmers to be among those providers.

TelecomThree years ago, 93% of all mo-bile phones shipped to Paki-stan were feature phones, not smartphones, as the country lacked the network needed to support smartphones, even though some users did own them. The creation of 3G/4G networks across the country has changed mobile phone usage since then. In the first quarter of 2015, smartphones made up around 30% of all mobile devices shipped to Pakistan. This is up from 25.3% in the fourth quarter of 2014, and from 14.7% in the first quarter of 2014.

As of July 2015, there were 14.6 million 3G and 4G mo-bile users in Pakistan, but that is only about 10% of all mobile subscribers in the country. The mobile phone penetration rate is 75%, so one-quarter of the country still has not purchased any mobile device. Those who already have a mobile device may still choose to purchase a smartphone to take advantage of the new networks. This de-gree of market penetration, combined with the availability of 3G and 4G networks, means that Pakistan’s telecom industry stands to experience significant

development and growth. It is estimated that by December 2016, there will be 40 million smartphones in Pakistan.

Over two million users look at purchasing a phone online each month, and cell phone companies in Pakistan are trying to capitalize on this. In September, Google hosted Google’s Tech Mela, a 10-day shopping festival that featured many new cell phones and specials. Attendees could pur-chase tablets, data bundles, and personal tracking devices. Participating companies in-cluded Samsung, Microsoft, Huawei, PTCL, Rivo, TPL Trakker, Innjoo, Infinix, Intex, Telenar, and Zong.

Pakistan’s leading vendor is QMobile, with a market share of around 58%. Nokia and Voice are the runners-up at 17% and 5%, but many new vendors are coming into the market to take advantage of its upswing. Huawei, for example, gained a 7% share of the market in the first quarter of 2015 due to a buyer-pleasing balance be-tween features and pricing.

The telecom industry did experience a setback fairly recently. The Pakistan Tele-communication Authority required that all SIM cards be biometrically reverified, in an effort to curb terrorism. Members of the telecom in-dustry had to purchase equip-ment specifically for biometric reverification, install it, and then use it to biometrically identify all SIM card activa-tions through the National Database and Registration Authority’s database. They then passed these costs on to consumers, which resulted in a market slowdown.

However, the major hurdles of the biometric reverification

process have been crossed, and now that companies own the equipment and know how to use it, the market should continue to grow. Companies in the industry can encour-age this growth by showing consumers how to use smart-phones and how the devices can improve their lives, while remaining sensitive to con-sumers’ economic concerns.

Automobile IndustryThe automobile industry, which employs around 3.5 million people in Pakistan, is experiencing long-overdue growth. Part of this is due to interest rates. Auto loan rates are currently around 11% (an-nual), compared to the previ-ous high rate of 20%, so con-sumers are more willing and able to purchase vehicles. The country’s overall economy is another positive factor, as it is at a seven-year high.

This optimism is reflected in sales figures. A study re-leased in June by Carmudi showed that more than 58% of car dealers in the country saw an increase in sales in the pre-vious twelve-month period. Experts believe that around 165,000 vehicles will be sold in 2015, which is close to the amount sold in 2012.

Another sign of the in-dustry’s growth is in vehicle manufacturing. In April 2015, Yamaha Motor began build-ing motorcycles at its new facility in Bin Qasim, outside Karachi; this is the first time in seven years that Yamaha Motor has assembled motor-cycles in Pakistan.

Globally, 80% of customers looking for a new car and near-ly 100% of customers look-ing for a used car begin their search online. In Pakistan, however, only 30% of buy-ers use the internet to gather information before buying a vehicle. The rate of internet usage among sellers is lower: 25% of dealers have reported using websites to reach poten-tial customers, while Facebook is used by about 17% of deal-ers. More car dealers prefer to advertise offline, mainly in newspapers, at a rate of about 42% of dealers.

As people’s access to the in-ternet grows, in part due to the increase of 3G/4G networks in Pakistan, the number of Paki-stan’s dealers using the internet to reach buyers—and the num-ber of buyers using the internet to find vehicles—should in-crease dramatically. This is one way in which substantial finan-cial industry growth could take place if dealers and customers are ready to take advantage of this new sales avenue.

Pharmaceutical Industry Pakistan’s pharmaceutical in-dustry is the world’s sixth larg-est, with a total market size of PKR220 billion. It directly employs 70,000 people and indirectly employs 150,000. Though the sector’s workforce is significantly smaller than that of the textile or automobile sec-tors, it is still able to meet 70% of Pakistan’s demand for phar-maceutical products, in terms of volume, by domestically pro-ducing analgesics, anti-depres-sants, herbal and homeopathic medicines, and penicillin. Other needed pharmaceutical products, such as cancer drugs, are produced in other countries and then imported.

The industry’s cumulative annual growth rate has been around 12% for the last three years, and this is likely to in-crease due to several factors. Pakistan has a high rate of pop-ulation growth, with more than 50% of its population under the age of 19. The average life ex-pectancy is rising. In addition, the World Bank has approved a loan for approximately $100 million for financing health reforms in the Punjab region, which should increase the number of people who have ac-cess to quality health services. Healthcare spending overall is expected to increase from PKR521.91 billion in 2012 to PKR986.53 billion by 2017.

Perhaps most notably, the government is finally allowing pharmaceutical companies to raise prices for the first time since 2001, with the exception of certain medications whose prices could be raised through a hardship allowance. The gov-ernment’s strict regulations of how prices can be raised and to what degree, combined with Pakistan’s growing economy, should keep prices in check so that consumers can still pur-chase them while allowing phar-maceutical companies to re-coup their production costs and increase their profits. Thus, the pharmaceutical industry offers opportunities for both domestic and international investors.

Strong growth expected for leading industries Despite a challenging environment in the traditional industry sector, the pharmaceutical and technology sectors are emerging as strong growth drivers for the economy

Textiles manufacturing generates billions of dollars in economic activity, a sum that has been increasing over the last year or so. In August 2015, textile exports recorded double-digit growth of 11.24% compared to the same time one year ago.

In the first quarter of 2015, smartphones made up around 30% of all mobile devices shipped to Pakistan. This is up from 25.3% in the fourth quarter of 2014, and from 14.7% in the first quarter of 2014.

Pakistan’s pharmaceutical industry is the world’s sixth largest, with a total market size of Rs. 220 billion ($2.1 billion US). It directly employs 70,000 people and indirectly employs 150,000.

Pakistan’s pharmaceuticals industry is the world’s sixth largestTextiles is the mainstay of Pakistan’s economy

Mr. Aziz Boolani, CEO of Serena Hotels South and Central Asia

awaken investor interest - home - united worldsive military operation, zarb-e-azb. it stands out as...

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