investment in pakistan - veranstaltungen - … 2016, bmi research report named pakistan as one of...
TRANSCRIPT
Investment in Pakistan December 2016
Agenda
S.
No
Topics
1. Introduction to Pakistan’s Economic Outlook Stability to Prosperity
2. Game-Changing Economic Developments China Pakistan Economic Corridor, Gawadar Port
3. Energy Outlook Moving from scarcity to surplus
4. Investments underway
5. Pakistan’s Business Confidence Index OICCI Outlook
6. Introduction to Linde
2
Short Profile
Area 796,100 km2
Population 192 m growing 2% yoy.
GDP p. capita USD 1,152
Median age 22.5 years
Life Expectancy 65 Years
Literacy rate 60%
Fx BU17 EUR 1 = PKR 119.6
Government Federal government established by
constitution of Pakistan
Agriculture Sector
Industrial Sector
GDP composition
Pakistan
20%
59%
21%
Services Sector 0.23
2
3.6
2.72.5 2.5
-0.19
1.4
2.5
2.1
4.9
5.7
3.9
5
3.2
3.9
4.4
5.1
4.54.3
5.7
-2
0
2
4
6
2014-15 2009-10 2010-11 2011-12 2012-13 2013-14
Services
Manufacturing
Agriculture Sectoral Growth of GDP (in %)
2015-16
Pakistan Economic Outlook – From Stability to Prosperity Leading economic institutions acknowledge recovery and future growth.
21/12/2016 Fußzeile
4
Just three years ago, the country was on the brink of an
economic crisis. (…) thanks to the authorities’
homegrown program of reforms that the IMF
supported, the economy is on a much stronger footing.
Public finances have improved considerably, external
reserve buffers have been rebuilt, and growth has been
gradually strengthening. These are very encouraging
developments.
Christine Lagarde (Managing Director IMF)
Improved Country Risk Ratings in 2016:
• B Stable (Fitch), B Stable (S&P) vs. B negative in 2015, B3 Stable (Moody’s) vs. Caa1 positive in 2015.
• Siemens has upgraded Country Risk rating from 8+ to 7- (equivalent to S&P’s “B”).
Improved security situation, reducing energy deficit
• Military/Government’s tough stance on militants/terrorism/crime has resulted in significant improvement.
Lowest interest Rates in 4 Decades
• Bank Interest Rates: 5.75% (Lowest in 4 decades) leading to higher consumer demand & private sector investment and
improved project feasibility.
Increased Foreign Investment Inflows
• Increased investment is a testament to the improved social/economic/security/power situation.
Pakistan Economic Outlook – From Stability to Prosperity Leading economic institutions acknowledge recovery and future growth.
5
• GDP growth to accelerate to 5.1% by FY18. Investment
expected to increase from 13.4% in FY15 to 14.1% in FY
18 led primarily by CPEC.
• GoP attracted significant investments into electricity
generation, mostly private, complemented by investments
in transmission and distribution, altogether close to US$ 60
billion.
World Bank
• Growth accelerated in Pakistan due to macroeconomic
and structural reform program, sharply lower oil prices,
and improved security. Inflation and the current account
deficit were lower than expected, while foreign
exchange reserves strengthened and the budget deficit
shrank. ADB raises the projection for growth in
FY2017.
ASIAN DEVELOPMENT BANK
• “if all the planned projects are implemented, the value
of those projects would exceed all foreign direct
investment in Pakistan since 1970 and would be
equivalent to 17% of Pakistan's 2015 gross domestic
product. It is further estimated the CPEC project will
create some 700,000 direct jobs during the period
2015–2030 and add up to 2.5 percentage points to the
country's growth rate.”
DELOITTE REPORT ON CPEC
In 2016, BMI Research report named Pakistan as one of the ten
emerging economies with a particular focus on of its manufacturing hub.
• The government has stabilized the economy over
three tough years
World Bank Group (WBG) President Jim Yong Kim.
• Upgraded PK from Frontier Markets status to Emerging
Market status. Likely to generate global portfolio investment
inflows of around $475 million by mid-2017.
MSCI is a leading provider of international investment decision
support tools.
’11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18
= Pakistan
3,6 3,8 3,7 4,0 4,0 4,7
5,7 6,2 7,0 7,0
4,5
2,6
0,7
4,5 4,8
6,8 7,7 7,7 7,7 7,7
13,7 11,0
7,4 8,6
4,5 3,5 6,0 6,0 6,0 6,0
GDP growth (in %)
IP growth (in %)
Inflation (in %)
6
‘19 ‘20
Source:. Pakistan Economic Survey 2015-2016 & Budget Brief 2016,
Political environment
Current civilian administration will remain in
office until 2018.
Focus on transit & energy infrastructure
development (CPEC, CASA 1000, TAPI, IP)
GDP
Real GDP growth 4.7% (FY 2016) highest in 8
years.
Exceptional growth in industrial & services
sectors offsets agricultural decline.
Growth underpinned by economic reform,
improved energy & gas supply, improved
security situation and political stability.
FDI recorded a growth of 5.8% (Jul 15 to Apr
16)
IP
Industrial sector growth at 6.8% during FY16
against the target of 6.4%. (An 8 year high).
LSM grew by 4.6% compared to 3.3% LY
and is expected to grow by 5.9%.
High growth sectors include Automobiles,
Chemicals, Fertilizers, Pharmaceuticals,
Steel, Food & Beverages & Petroleum
products
Inflation
Inflation to remain benign and is expected to
remain well below its FY16 annual average
target of 6%. Current SBP Policy rate is at
5.75%
Pakistan Economic Development - GDP – IP – CPI
Game Changing Economic Developments
China Pakistan Economic Corridor (CPEC)
→ USD 51.5 bn investment in railways, highways, steel, automotive, electricity, engineering,
high technology, and environmental projects. Expected to contribute to the country’s GDP
by 3 per cent.
Gwadar Port
→ Developed under CPEC at a cost of $1.62 billion to link N. Pakistan and W. China to the
deep water seaport. Also to be the site of a floating liquefied natural gas facility that will be
built as part of the larger $2.5 billion Gwadar-Nawabshah segment of the Iran–Pakistan
gas pipeline project. Inaugurated in Nov 2016.
Focus on Energy
→ Turkmenistan Afghanistan Pakistan India Pipeline (TAPI)
Natural gas pipeline developed by the Asian Development Bank to transport NG
from Turkmenistan through Afghanistan, Pakistan and then to India.
Construction started on 13 December 2015. Expected to be operational by 2019.
→ Central Asian South Asian Project (CASA 1000)
$1.16 billion project under construction to allow export of surplus hydroelectricity from
Tajikistan and Kyrgyzstan to Pakistan and Afghanistan.
Groundbreaking on May 12, 2016 and expected completion by end 2018.
→ Iran Pakistan Pipeline (IP)
Under-construction 2,775-kilometre pipeline to deliver natural gas from Iran to Pakistan.
7
Thar Coal-based power plants
to reduce cost of energy.
Focus on renewable energy
sources – Hydel Power, Wind
Corridors, Largest Solar Park in
the World.
Railways, Roads and
Connectivity to improve
Regional trade.
Secondary Industry – Steel,
Cement, Glass, etc growth and
upgradation to serve increased
demand and standards.
8
Industry Outlook
Metallurgy & Glass Steel demand expected to grow 30% to 6Mn MT on back of infrastructure projects
in next 2-3 years.
Annual Steel consumption around 4 Mn MT.
Chemicals Previously constrained on account of Energy availability. LNG import has allowed
full production capacity utilization.
Food & Beverage Population growth + higher PCI + demand for convenience/fast food + busy
lifestyles
Growth in snacks, frozen food industry
Manufacturing Infrastructure project driven growth. Capacity expansion by Steel producers .
Increased durables demand on back of consumer spending/increased per capita
income.
Automotive industry growth through investment and increased consumer demand.
Capacity Expansion/Green fields by cement manufacturers.
Oil & Gas Isomerization projects - Import substitution.
Shift to Euro 2 compliant HSD. DHDS projects
Khalifa Coastal Refinery project.
Increased exploration activity.
Healthcare Population growth and higher HC spending by GoP and donors
Pakistan Sectoral Outlook
9 Source:. *Pakistan Economic Survey 2013-2014, 2014-2015 2015-2016 & Budget Brief 2016.
Energy Outlook Moving from Scarcity to Surplus
The 3 point agenda in this regard is:
- Increase generation capacity.
- Reduce dependence on FO. Reduce cost.
- Improve transparency. Reduce losses.
Source: Ministry of Power 10
FO
12%
LNG
11%
RE
9%
Nuclear
7%
Hydel
37%
Local Gas
8%
Local Coal
8%
Imported
Coal
8%
2022 - 50,194 MWs
FO
14%
LNG
13%
RE
11%
Nucle
ar
8%
Hydel
44%
Local
Gas
10%
2016 - 19,917 MWs
Generation Capacity
Pakistan Security Situation Securing situation improved on back of successful counter-terrorism initiatives
• Security incidents declining vs previous year due to Government/military-led counter operations against
terrorists across country.
• Crimes such as kidnapping, targeted killing, extortion significantly reduced especially in Major cities
through multi pronged government operation.
• Foreigners in general and multi-national interests in Pakistan face no significant direct security threat .
• Business can continue to operate with routine security controls and mitigation in place.
11
Increased Foreign Direct Investments
Young population, high growth rates, low interest rates driving increased investments.
.
12
$46bn investment until 2030. CPEC initiative
includes transport infrastructure projects ($11bn,
mostly public investment) and energy projects ($33bn,
mostly private).
Renault and Ghandara Nissan to invest USD 100
million in car manufacturing unit. Expected to
commence production in 2018.
“(Pakistan is) one of the region’s emerging
economies. With annual population growth of more
than 2 percent, Pakistan has one of the highest
growth rates in Asia. This results in an increasing
number of households, which have a need for home
appliances. We are keen to be part of Pakistan’s rising
growth story. The strongly developing middle class
rising consumer demand and the growth of
manufacturing and automotive sectors are very
positive indicators.”
Gokhan Sigin, Chief Executive Office, Bosch
Arcelik, a Turkish company has acquired Dawlance, a
privately owned company of white goods, for a sum of $258
million.
Dutch Friesland Campi recently agreed to acquire 51%
shares of Engro Food for $448 million.
Shanghai Electric Power finalized KE acquisition at
USD1.8 bn.
Suzuki, considering a further investment of $460
million for a new factory in the country.
Coca – Cola invests USD 380 million in 3 green-field
bottling plants. (1 plant commissioned and ground-breaking
of 2nd plant)
Pepsi sets up new Frito – Lays plant in Multan – expected
commissioning early 2018. (Nitrogen Opportunity)
“due to its growing population, the country cannot be
ignored by MNCs. Pakistan is expected to register a steady
GDP growth of 4.5% over the next 2 years according to the
IMF and lower inflation rate positively affects domestic
purchasing power.”
Ina Lepel, German Ambassador to Pakistan.
Audi has expressed interest to set up an assembly
plant in Pakistan.” Plans to invest nearly over $30
million in order to setup the new assembly plant.
Key Advantages of Pakistan
Location: Connected to South and Central Asia. Borders China and India. Trade corridor
between East & West. CPEC reduces shipping time from 45 days to 10 days.
Population: 6th most populous country in the world. Young Population: Median Age is 22.5
years, driving consumer growth. Growing middle class, rapid urbanization and an increasing
number of women in the workforce has led to an increase in disposable incomes. 10th largest
labour force.
Natural Resources: Bronze, Coal, NG, Crude reserves, Salt, Iron.
Attractive tax policies: 100% foreign ownership of companies and full repatriation of profits
to home country.
Home to all major multinational organisations. Availability of all raw materials.
Local investment partners support FDI – e.g. Kia & Lucky, RENAULT & Dewan,
Mondelez and Continental Biscuits etc
13
21/12/2016 Fußzeile 14
Pakistan Business Confidence Business Confidence Index – OICCI Members vs. Overall
• The confidence level of OICCI members participating in the BCI showed a
significant growth from 22% in November 2015 to 36% in wave 12.
-27% -26% -24%
-25%
-34%
2% 1%
1%
18% 22%
36%
-3%
5%
10%
1%
-3%
32% 31%
16%
48% 41%
55%
June' 10 Nov' 10 Feb' 11 Nov' 11 Aug'12 July' 13 Feb' 14 Sep'14 Apr'15 Nov'15 Apr'16
Overall OICCI Members
Introduction to the Linde Group €18 bn company present in 100+ countries.
15
• History spanning more than 130 years
• Focus on technology and value creation.
• ~65,000 employees working in more than 100 countries worldwide.
• The company’s founder, Professor Doctor Carl von Linde, invented
refrigeration technology and pioneered air separation.
• A global market leader in gases and engineering solutions.
Countries home to operational companies in which Linde holds a direct or indirect shareholding and which belong to The Linde Group.
Americas EMEA Asia / Pacific
Reportable Segments
16
Assets & Facilities Three ASU plants with a capacity of producing about 263 TPD of Air Gases.
Two CO2 plants with capacity to produce 83 TPD of product. (Only 23 TPD operational)
More than 260 Customer Tanks (VIEs) and 34 Road Tankers (VITTs)
Two Hydrogen plants with capacity of 426 M3/hour
CRYOSS GAN plant at PARCO Refinery
Linde Pakistan Highly diversified customer base with contracted business
16
Markets
Market Leader in bulk ASU gases and Tier-1 welding consumables
Largest provider of Medical Gases in the Healthcare sector in all major cities
Business Profile 4 Business areas – Tonnage, Bulk, PGP and Healthcare
Portfolio of Industrial and Special gases, Health care Products and Welding
products
Serves the needs of about 1400 customers across a myriad of sectors e.g.
Manufacturing, Fabrication, Chemicals, Petrochemicals, F&B etc
Pakistan’s largest Air Separation Unit installed at Sunder Industrial Estate
Linde Pakistan A history of on-going investment!
18
2015 – YTD 2016
Investment in upgrading
existing plants.
Investment in ensuring
global healthcare medical
gas standards at all
hospitals.
Conclusion
We are “bullish” on the opportunities presented by Pakistan.
On-going growth and investment in the country by many local and foreign companies.
Security, Energy and Instability related issues are being dealt with and Pakistan is on
a growth trajectory.
Projects afford multiple opportunity for FDI in downstream / upstream.
19
Thank you