Pakistan The Preferred Investment DestinationPakistanThe Preferred Investment Destination

Czech Asia Forum, 2010Nadia RehmanCommercial Counsellor, Pakistan

Executive SummaryOverview of the Investment PolicyInfrastructureTransport IT & CommunicationEnergyBilateral Trade

Pakistan- Key Facts

Area 796,096 square kmPopulation ~ 170 millionLand BoundariesTotal 7,266 km Afghanistan 2,430 km, China 580 km, India 2,240 km, Iran 909 km.Coastline 1,046 km Climatic ZonesArid Desert, Sub-Tropical and Temperate Mountain LandsTerrain Flat Indus plain in east, mountains in north and northwest, Balochistan plateau in west and desert in south. Elevation Extremes Lowest point: Arabian Sea 0 mHighest point: K2 (8,611 meters ), 1000 peaks above 5,000 metersLengthKarachi Khyber (1,057 kilometers), which can be traveled by Motorway and Railway.

Pakistan Topography

Pakistan is well located to become one of Asias premier trade, energy and transport corridorsProximity to Middle-East, Africa, China and Europe

Recent developments to realize this vision include:Gawadar port- Linking Afghanistan, Iran and China and onwards to Central Asia, Middle East & Europe

Geographical location suits transit trade At The Center of Asian GrowthLand locked energy rich Central Asia Booming ChinaHigh Energy DemandBooming South AsiaHigh Energy DemandCapital & Energy surplus Middle East

Demographic DividendPopulation growing at 1.9% - representing 2.5% of worlds populationPer capita incomes rising despite significant population sizeDemographic dividend with (54% of population below 19 years of age) will be in play for some time to come

Doing Business 2010

Home to over 700 Companies

Poverty Reduction Strategy 2009-10 has defined a 9-point agenda to increase productivity, efficiency & growth rates

Macroeconomic StabilizationSocial Development and ProtectionAgriculture Industrial CompetitivenessHuman Capital DevelopmentEnergyCapital MarketsPublic-Private Partnerships for InfrastructureInstitutional /Governance ReformReform Process 9 Point Plan

Liberal Investment PolicyNational treatment to foreign investorsAll economic sectors open to foreign investorsBilateral AgreementsInvestment Protection47 CountriesAvoidance of Double Taxation52 CountriesProtection of foreign investorsForeign Private Investment (Promotion & Protection) Act 1976Protection of Economic Reforms Act 1992

Investment Policy Package

POLICY PARAMETERS

Manufacturing SectorNon-Manufacturing SectorsAgricultureInfrastructure & SocialServices including IT & Telecom ServicesGovt. PermissionNone (Exceptions - Arms and ammunitions, High Explosives, Radioactive substances, Security Printing, Currency and MintNot required except specific licenses from concerned agencies.Remittance of capital, profits, dividends, etc.AllowedAllowedUpper Limit of foreign equity allowed100%100%100%100%Minimum Investment Amount (M $)No 0.300.300.15Customs duty on import of PME5%0%5%0-5%Tax relief (IDA, % of PME cost)50%50%Royalty & Technical FeeNo restriction for payment of royalty & technical fee.Allowed as per guidelines - Initial lump-sum up to $100,000- Max Rate 5% of net sales - Initial period 5 years

Sector-wise FDI in PakistanUS$ MillionsSource: State Bank of Pakistan

Sector2003-042004-052005-062006-072007-082008-09Oil & Gas 202.4193.8312.7545.1634.8775.1Financial Business242.1269.4329.2930.31,607.6707.4Textiles35.439.347.059.430.136.6Trade35.652.1118.0172.1175.5165.7Construction32.042.789.5157.188.592.5Power14.273.4320.6193.470.3119.8Chemical15.351.062.946.178.074.3Transport8.810.618.430.273.093.1Communications(IT & Telecom)221.9517.61,937.71,898.71,625.3879.1Agriculture3.9319.360.43134.2450.4493.6Others170.1274.0285.01,107.2769.7778.2Total949.41,523.93,521.05,139.65,152.83,721.8

Investment Opportunities

Oil & GasMiningPowerIT & Telecom

Investment Opportunities

Investment Opportunities

InfrastructureTransport & Communication

Railways Sector OverviewSource: Pakistan Statistical Year Book 2009

Total Track (Km)11,246Locomotives540Freight Wagons20,724

Passengers Carried~80M/yrFreight (000s tonnes)7,234/yr

Railways Investment Proposals

ProjectTrack LengthDoubling of tracks300 kmReplacement of tracks700 kmRehabilitation of tracks500 kmNew tracks800 kmHigh-speed train(Karachi-Peshawar)1650 km Regional linkages~10,000 km

Railways Investment Proposals

Procurement / manufacturing of HD wagons (3,500)Procurement / manufacturing of DE locomotives (150)Overhauling of locomotives (27)Replacement of obsolete signaling system Procurement of DE multi-train setsProcurement of mechanized track maintenance machineryPrivatisation of train operationsCargo handling & developmentPrivatisation of PR manufacturing facilitiesOutsourcing of repair / maintenance of tracks, rolling stock and services

National Highway Corridor

Khunjerab PassN-35N-70N-50N-40N-25KARACHICHAMANTAFTANN-65N-5GWADARQUETTAPESHAWARN-5N-55Indus RiverJhelum RiverRavi RiverM-3HubM-5M-6M-9N-15GilgitS-1N-75M-1M-2GABDN-45N-80S-2N-10M-8M-7LAHOREM-4N-85NHA NETWORK Only 4 % of total networkCarries 80% of commercial trafficN-5 carries 65% of this loadNational Highway Network

DescriptionKm Total Network260,000NHA Network11,485Provincial Roads101,000District Roads94,150Urban Roads54,000

NHA - PPP Program & ModalitiesPublic Private Partnership forimproved technology / skills and management practicesoperational efficiencies Motorways, highways, tunnels and road structures Modes of PPP participation include Build, Operate & Transfer (BOT)Finance, Manage, Operate & Transfer (FMOT)Operating Concessions (OC)

Airport InfrastructureMajor airports: Karachi, Lahore & Islamabad

Secondary airports: Peshawar, Quetta, Multan, Faisalabad, Sialkot & Sukkur

Investment Opportunities:New airports / upgrading of existing airportsCargo terminals / villagesOutsourced operations, facilities and services

Air craft movements at airports197,486,000Passengers handled141.2 M

Cargo31.6 M tonnes

Mail5.3 M tonnes

Ports & ShippingMain ports: Karachi, Qasim and GawadarPort entries: 3372 vessels with registered tonnage of 50 million tonnesCargo handled 64.8 million tonnesCargo in containers 5.9 million tonnesInvestment opportunitiesCargo villages & industrial parksContainer terminalsOutsourced operations, facilities and servicesKPT enclaveMiscellaneous supporting infrastructure

Information Technology and Telecommunication Sector

OverviewOverall Tele-density growth of over 60% in Pakistan telecom sector

Investment of more than US$ 8 billion in the last four years

Largest pool of educated and talented workforce in the country

Transparent and streamlined government regulatory policies.

Teledensity Growth in Pakistan

Chart2

3.438.30.17

3.3722.20.66

3.0440.91.08

2.754.71.4

2.356.81.5

Fixed

Cellular

WLL

Total Teledensity

Sheet1

2004-052005-062006-072007-082008-Mar 09

Fixed3.433.373.042.72.3

Cellular8.322.240.954.756.8

WLL0.170.661.081.41.5

Total11.926.2345.0258.860.6

Sheet1

Fixed

Cellular

WLL

Total Teledensity

Sheet2

Sheet3

Cellular Subscribers

Chart8

12.7

34.5

62.3

88

91.4

Period

Millions

Growth of Cellular Subscribers

Sheet1

2004-052005-062006-072007-082008-Mar 09

Fixed3.433.373.042.72.3

Cellular8.322.240.954.756.8

WLL0.170.661.081.41.5

Total11.926.2345.0258.860.6

2004-0512.7

2005-0634.5

2006-0762.3

2007-0888

2008-0991.4

Jun-200745,153

Sep-200757,200

Dec-200790,700

Jun-2008168,082

Dec-2008267,180

2004-0577

2005-061198

2006-071348

2007-081331

Jul-Dec 08716

Mobilink30.90%

Telenor21.90%

Ufone21.40%

Warid19.00%

Zong6.80%

Sheet1

Fixed

Cellular

WLL

Total Teledensity

Sheet2

Period

Millions

Growth of Cellular Subscribers

Sheet3

Period

Number of Subscribers

Broadband Subscribers

Period

US$ Millions

Foreign Direct Investment

Market Share of Cellular Operators

Ufone21%

Warid19%

Mobilink31%

Telenor22%

Zong7%

Cellular Operators in Pakistan

Chart7

0.309

0.219

0.214

0.19

0.068

Market Share of Cellular Operators

Zong7%

Telenor22%

Mobilink31%

Warid19%

Ufone21%

Sheet1

2004-052005-062006-072007-082008-Mar 09

Fixed3.433.373.042.72.3

Cellular8.322.240.954.756.8

WLL0.170.661.081.41.5

Total11.926.2345.0258.860.6

2004-0512.7

2005-0634.5

2006-0762.3

2007-0888

2008-0991.4

Jun-200745,153

Sep-200757,200

Dec-200790,700

Jun-2008168,082

Dec-2008267,180

2004-0577

2005-061198

2006-071348

2007-081331

Jul-Dec 08716

Mobilink30.90%

Telenor21.90%

Ufone21.40%

Warid19.00%

Zong6.80%

Sheet1

Fixed

Cellular

WLL

Total Teledensity

Sheet2

Period

Millions

Growth of Cellular Subscribers

Sheet3

Period

Number of Subscribers

Broadband Subscribers

Period

US$ Millions

Foreign Direct Investment

Market Share of Cellular Operators

Ufone21%

Warid19%

Mobilink31%

Telenor22%

Zong7%

Broadband Subscribers592%

Chart3

45153

57200

90700

168082

267180

Period

Number of Subscribers

Broadband Subscribers

Sheet1

2004-052005-062006-072007-082008-Mar 09

Fixed3.433.373.042.72.3

Cellular8.322.240.954.756.8

WLL0.170.661.081.41.5

Total11.926.2345.0258.860.6

2004-0512.7

2005-0634.5

2006-0762.3

2007-0888

2008-0991.4

Jun-200745,153

Sep-200757,200

Dec-200790,700

Jun-2008168,082

Dec-2008267,180

Sheet1

Fixed

Cellular

WLL

Total Teledensity

Sheet2

Period

Millions

Growth of Cellular Subscribers

Sheet3

Period

Number of Subscribers

Broadband Subscribers

Foreign Direct Investment Attracted by Telecom Sector

Chart5

77.42

1197.55

1347.69

1330.9

716

Period

US$ Millions

Foreign Direct Investment

716

1331

1348

77

1198

Sheet1

2004-052005-062006-072007-082008-Mar 09

Fixed3.433.373.042.72.3

Cellular8.322.240.954.756.8

WLL0.170.661.081.41.5

Total11.926.2345.0258.860.6

2004-0512.7

2005-0634.5

2006-0762.3

2007-0888

2008-0991.4

Jun-200745,153

Sep-200757,200

Dec-200790,700

Jun-2008168,082

Dec-2008267,180

2004-0577

2005-061198

2006-071348

2007-081331

Jul-Dec 08716

Sheet1

000

000

000

000

000

Fixed

Cellular

WLL

Total Teledensity

Sheet2

0

0

0

0

0

Period

Millions

Growth of Cellular Subscribers

Sheet3

Period

Number of Subscribers

Broadband Subscribers

Period

US$ Millions

Foreign Direct Investment

Opportunities AvailableDevelopment of IT Parks

Electronic Media and Content Development

Hardware Manufacturing

Software Designing

E-Business

Call Centers

Incentives Offered100% foreign equity allowed in software houses

Tax holiday on software exports

Duty free imports of hardware and software

90% first year allowance of equipment cost

Tax holiday of 7 years for Venture Capitalist funds

30% depreciation allowed on all computer related equipment

Power Sector

Overview65-70 % of the population has access to electricityIncreasing electricity demand Government of Pakistans policy commitment to increase private sector participation.Discovery of Thar Coal fieldsRenewable Energy

Main Key PlayersMinistry of Water and Power

Water and Power Development Authority (WAPDA)

Karachi Electric Supply Corp (KESC)

Pakistan Electric Power Company (PEPCO)

Private Power and Infrastructure Board (PPIB)

National Electric Power Regulatory Authority (NEPRA)

Alternative Energy Development Board (AEDB)

Pakistan Power SectorMW %Private Sector MW %Public Sector

IPPs5,80830KESC1,7569Sub Total7,56439Grand Total19,400100

WAPDA-PEPCO11,37459NUCLEAR4622Sub Total11,83661

Historical Peak Load Demand Growth

Chart1

0.036

0.064

0.085

0.097

Growth Rates

Sheet1

2002200420062008

Growth Rates3.60%6.40%8.50%9.70%

Sales by Customer Category (2008)

Chart1

0.460.0650.2620.1270.0610.057

0.08CommercialCommercialCommercialCommercialCommercial

0.28IndustryIndustryIndustryIndustryIndustry

0.12TubewellsTubewellsTubewellsTubewellsTubewells

0.06othersothersothersothersothers

0

Domestic

Commercial

Industry

Tubewells

KESC

Others

12%

Sheet1

DomesticCommercialIndustryTubewellsothers

Domestic46.00%8.00%28.00%12%6.00%

Commercial6.50%

Industry26.20%

Tubewells13%

KESC6.10%

Others5.70%

Peak Demand Projection (2007-2030)

Chart1

18883

24474

36217

54359

80566

113695

Annual Growth Percentage = 8.1%

MW

Years

MW

Sheet1

YearsMW

1200718883

2201024474

3201536217

4202054359

5202580566

62030113695

Sheet1

0

0

0

0

0

0

5591 MW

11743 MW

18142 MW

33129 MW

26207 MW

Annual Growth Percentage = 8.1%

MW

Years

MW

Sheet2

Sheet3

Incentives OfferedFiscal Incentives:Customs duty at the rate of 5% on import of plant and machinery not manufactured locally.No sales tax on plant, machinery and equipment.Exemption from Income Tax.Initial depreciation allowance at the rate of 50%.Amortization of pre-commencement expenses allowed at the rate of 20% annually.

Incentives OfferedFinancial Incentives:Permission to issue corporate registered bonds.Permission to issue shares at discounted rate.Raising of local/foreign finance allowed.Abolition of the 5% limit on investment of equity.Full repatriation of capital, capital gains, dividends and profits are allowed.Double taxation treaties

Incentives OfferedLong-term agreements available on:Build, Own, Operate and Transfer (BOOT)Build, Own and Operate (BOO)

Protection against changes in taxes and duties.

Indexation of foreign operating and maintenance cost (variable and fixed) with US CPI.

New Amendments to Power Policy 2002Hedging against currency exchange risk.

Broadening access to debt financing.

Acceptance of Performance Guarantees and Letters of Credit in Euro, Pound Sterling, US Dollar and Yen ROE allowed in single currency

HYDROPOWER SECTOR

Hydropower Potential

Chart2

6500

38000

1400

8100

Hydropower Potential in Pakistan

1,400 MW

8,100 MW

6,500 MW

38,000 MW

Sheet1

Already Developed6,500

Pre-Feasibilities / Feasibilities Completed38,000

Under Construction1,400

Yet to be Studied8,100

Sheet1

Hydropower Potential in Pakistan

38,000 MW

6,500 MW

8,100 MW

1,400 MW

Sheet2

Sheet3

MBD00099119.xls

Chart1

6500

38000

1400

8100

Sheet1

Overview of Hydropower Sector

Already Developed6500

Pre-Feasibilities/Feasibilities Completed38000

Under Construction1400

Yet to be Studied8100

Sheet1

0

0

0

0

0

Overview of Hydropower Sector (In MW)

Sheet2

Sheet3

Operational Hydropower Stations

ProjectInstalled Capacity (MW)Energy Generation (GWh)1Tarbela3478158012Mangla100054433Warsak24310094Ghazi Barotha145070375Chashma Low Head1849596Rasul22637Dargai201628Jabban*201559Nandipur143210Chichoki Mallian13.22311Shadiwal13.53812Others629TOTAL646430751

Investment OpportunitiesProjects with feasibility studies availableSammar Gah Hydropower ProjectLocation District KohistanCapacity 28 MWConstruction Cost US $ 42 millionBatal Khwar Hydropower ProjectLocation UtrorCapacity 8.1 MWConstruction Cost US $ 14 million

Investment OpportunitiesMedium Size Hydropower Projects (Raw Sites)Arkari Gol Hydro Power ProjectLocation Momi Village, District ChitralDesign Capacity 26.4 MWEstimated Cost US $ 28.58 million

Bhimbal Hydropower ProjectLocation Naran, District MansehraDesign Capacity 8.1 MWEstimated Cost US $ 12 million

Investment OpportunitiesMedium Size Hydropower Projects (Raw Sites)Mastuj River Hydropower ProjectLocation Miragram, District ChitralDesign Capacity 8.9 MWEstimated Cost US $ 14.5 million

Lutkho River Hydropower ProjectLocation Shoghore, District ChitralDesign Capacity 6.4 MWEstimated Cost US $ 9.93 million

Investment OpportunitiesLarge Hydropower ProjectsDassu Hydropower Project Capacity 4320 MWEstimated Project Cost US $ 7.8 billion

Thakot Hydropower ProjectCapacity 2800 MWEstimated Project Cost US $ 6.0 billion

Patan Hydropower ProjectCapacity 2800 MWEstimated Project Cost US $ 6.0 billion

Investment OpportunitiesFeasibility studies of projects in process:Lower Spat Gah Hydropower ProjectCapacity 567 MWTentative Project Cost US $ 614 million

Lower Palas Valley Hydropower ProjectCapacity 621 MWTentative Project Cost US $ 667 million

Who Can Help?Embassy of PakistanBoard of Investment (BOI)Private Power and Infrastructure Board (PPIB)Sarhad Hydel Development Organization (SHYDO)National Electric Power Regulatory Authority (NEPRA)Ministry of Petroleum & Natural ResourcesMinistry of Water and PowerProvincial Agencies

Bilateral TradeTotal Bilateral Trade: 217,924,000 USDExports to Czech Republic have grown at a rate of 43% since 2006Trade balance is in the favour of Czech RepublicPak-Czech Forum 12th May,2010BIT and Avoidance of Double Taxation Treaty

Contact InformationNadia RehmanCommercial CounsellorOffice: +420-233-312-868Website:

Thank you

****(more than twice the area of Germany) (6th largest globally) Lush agrarian plains in the east, Hindukusk & Himalayan mountain ranges in the north**Pakistan becoming Asias trade, energy and transport corridor****Government strongly committed to restoring macroeconomic stability as well as the confidence of markets and investors

These nine points form the pillars of governments poverty reduction strategy***

Pakistan has a favourable investment policy the highlights are, National treatment to foreign investorsAll economic sectors open to foreign investorsForeign equity up to 100% allowedRemittance of capital, profits, royalty, technical & franchise fee allowedImport of raw material for export manufacturing zero-ratedBilateral AgreementsInvestment Protection47 CountriesAvoidance of Double Taxation52 CountriesProtection of foreign investorsForeign Private Investment (Promotion & Protection) Act 1976Protection of Economic Reforms Act 1992

I want to reiterate that the government of Pakistan is committed to facilitating foreign investors. We believe that given our geographic location Pakistan is positioned to be a key trade corridor in Asia******Total Track coverage is over 11,000Our trains carry 80 million passengers and more that 7 million tonnes of freight a year*the government has an ambitious goal of upgradation and expansion of the railway sector projects proposal vary from maintenance of the existing infrastructure to investment in new technologies such high speed trains between 2 key trade ports of Karachi and Peshawar. ***Pakistan National ************The government also offers favourable tax and fee incentives**RDF technology 10 (investment of 10-15 million dollars) projects are planned (25%-30%)Thermal power plants based on coal and natural gas energy mix 5-19%

Due to high cost of imported energy, government has decided to enhance the share of coal inthe over all energy mix from 5 percent to 19 percent by 2030. Energy Security Action Plan

*****In anticipation of the increasing demand, the government has drafted an Energy Security Action Plan*******I would like to conclude today with a very high priority and potential area of investment in Pakistan. This is in the hydro power sector. With the growing energy demand the government has developed Energy Security Action plan to grow hydropower supply threefold.

The purple area in the above pie chart represents hydropower projects whose feasibility studies have either started or are complete**********