FDI Seen Surging in Pakistan, But Some Western Investors Fret Over Chinese Influence

Posted on Posted inPakistan

Pakistan expects net foreign direct investment (FDI) to jump about 60 percent in 2017/2018, the chairman of Pakistan’s Board of Investment said, but some Western investors appear to be put off by China’s growing influence in the country.

Chinese companies are building roads, power stations and a deep-water port in Pakistan after Beijing offered more than $60 billion in funding for Pakistani infrastructure as part of China’s vast Belt and Road initiative (BRI). The China Pakistan Economic Corridor (CPEC) is BRI’s flagship project that will provide China the shortest route to Middle East, Africa and beyond. Its loan and investment package is funding new power plants in Sindh and Punjab province facing power crisis since over a decade.

Chinese loans and investment are helping Pakistan economic managers say, and has led to increased Beijing’s clout in the country at a time when Islamabad’s relations with the United States, an historic ally, are fraying over Trump’s South Asia policy on the 16-year-old conflict in Afghanistan its western neighbor.

Naeem Zamindar, a state minister responsible for promoting foreign investment in Pakistan, said some Western investors appeared reticent because of an incorrect perception that Chinese companies would get “exclusive advantages” and concessions that would not allow for an even playing field.

“A perception was created that the Chinese are taking over. The fact of the matter is that this is not true,” Zamindar told Reuters in his office in Islamabad.

Related Article: ‘CPEC is a Loan to Pakistan, Not a Giveaway From China’

“Pakistan’s government is very clear about it: we want investors of all hues to come in and participate in building this economy – whether American, English or Japanese.”

Zamindar said Chinese state companies building power stations had obtained soft loans but that was because the money was provided by Beijing, which made such terms a condition of financing the projects that were part of the CPEC, a key leg of the BRI network.

These are tied loans- some on soft terms and others on commercial basis with the condition that projects be built exclusively by Chinese state-owned companies.

It was need of the hour because of the energy crisis, several experts say. A major portion of the loans and investment amounting to almost $38 billion are earmarked for energy infrastructure.

But for the second phase of CPEC, in which a series of Special Economic Zones (SEZs) will be set up to boost Pakistan’s industries, Chinese companies will not receive preferential treatment, Zamindar added.

Also Read: Clean Belt and Road: China Establishes New Super Anti-Graft Agency

“That is completely non-discriminatory,” he said, adding that Pakistan’s Special Economic Zones Act stipulates no country or company will get preferential treatment within the SEZs.

“The (SEZ) concessions are published and are on the website, open to all.”

Zamindar said net FDI for the financial year 2017/2018 (July-June) is expect to reach about $3.7 billion, with Chinese companies providing up to 70 percent of the new investment.

Net FDI has been gradually rising since 2014/2015, when it plummeted to less than $1 billion. It rose to $2.3 billion last year, according to central bank data.

Foreign direct investment is separate from the China-Pakistan Economic Corridor investments. More than 20 CPEC projects worth nearly $27 billion are currently being implemented, a senior government official told Reuters, meaning either work has begun on the projects or financing deals have been completed.

Zamindar said militant attacks were sharply down in recent years and security was much improved, but some investors are unaware of this and had an outdated “negative image” of Pakistan. Yet overall interest in Pakistan had jumped, Zaminder said, and he would tour Britain, the United States, France and Saudi Arabia in coming weeks to promote the opportunities available in the country.

“We are open for business.”

This week Unilever announced it will make fresh investment of $120 million for expansion of its operations in the country over the next two years.

The announcement comes as a welcome sign for Pakistan that has suffered from low levels of FDI in recent years.

“Unilever is aiming to make it (Unilever Pakistan) a billion-euro firm next year (by December 2019) from 800-810 million euros (in revenues) at present,” company’s Senior Manager Corporate Affairs Hussain Ali Talib told The Express Tribune.

Leave a Reply

Your email address will not be published. Required fields are marked *