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Business Opportunities in Pakistan
3rd December 2002
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PAKISTAN IN PERSPECTIVE2001 - 2002
Area 796,000 Sq KmPopulation 140 MnWorkforce 41 MnGDP US$ 62 BnGDP growth 3.6%GDP / Capita US$ 443Inflation 2.6%Exchange rate PKR 58.5 / US$Fixed Tel. Lines 3%Cellular lines 0.7%
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PAKISTAN IN PERSPECTIVEcont’d
Revenues % GDP 11.3Investment % GDP 13.9
Literacy Rate 51%Universities 77
Public 42Private 35
I.T / BCS/MCSInstitutes 27ISPs 115
Registered Cos 43,000+Listed Companies 700+Stock ExchangeImprovement 41%
Industrial Estates /Zones 63Export ProcessingZones 3Software Houses 664
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GDP CONSTITUENTS
Agriculture25%
Manufacturing17%Energy
4%
Others24%
Finance & Insurance
3%
Construction2%
Whole Sale and Retail15%
Transport and Communication
10%
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KEY SECTORSCotton and Textile Industry US$8bn
Energy Production: Gas is 2.5bn cubic feet/day and Oil is 60,000 bpd
Tele density: Fixed Line 3% and Cellular 0.7%
Banking Sector: Deposits of US$22bn divided between 38 banksStock Market Capitalization of US$10bn
More than 200 Multinationals Operating in Pakistan in Energy,Banking, Food Marketing, Pharmaceutical etc. sectors
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Corporate Performance - ROECompany Sector 1997 1998 1999 2000 Average
Shell Pakistan Oil Distribution 30% 16% 22% 27% 23%National Refinery Oil Refining 36% 31% 33% 30% 32%Gilette Pakistan Consumer Items 6% 26% 33% 33% 20%Knoll Pharmaceutical Pharmaceutical 16% 19% 19% 26% 21%Glaxo Welcome Pharmaceutical 15% 20% 19% 22% 17%Colgate Pakistan Consumer Items 17% 13% 18% 21% 19%Nestle Milkpak Food 17% 24% 33% 32% 25%General Tyre Tyres 1% 17% 21% 29% 14%Siemens Engineering Engineering 23% 19% 10% 20% 20%
Source: Company Reports (annual A/Cs);ROE:Return on Equity
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OPERATING ENVIRONMENTO Changes in Economic Fundamentals
O Improved Trade & Current Account BalanceO Stable Exchange RateO Increased Foreign Exchange ReservesO Economic Sanctions Lifted
O Regulatory Environment in place for Private SectorO Deregulation / Privatization
O Pakistan can act as Trading Base to Central Asia
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PAKISTAN’S INVESMENT PACKAGE
Allowed as per guidelines - Initial lump-sumupto $100,000- Max Rate 5% of net sales - Initial period 5years
No restriction for payment of royalty & technicalfee.
Royalty &Technical Fee
50%50%Tax relief (IDA, %of PME cost)
0-10%***10%***0%***5-25%
10%**5%**5%**Customs duty onimport of PME
0.30.30.3NoMinimumInvestmentAmount (M $)
Initially 100% but tobe diluted to 60%within five years.
100%60%100%Upper Limit offoreign equityallowed
AllowedAllowedRemittance ofcapital, profits,dividends, etc.
Not required except specific licences fromconcerned agencies.
Not required except 4 specified industries *Govt. Permission
Services including IT& Telecom Services
Infrastructure & Social
Agriculture
OtherIndus- tries
Engg+ Chem, Agribusiness, housing &construction,tourism Cat(C&D)
Hi-Tech& ITCat(B)
V.A +ExpCat(A)
Non-Manufacturing SectorsManufacturing SectorPriority Industries
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LIBERAL INVESTMENT POLICYAll economic sectors open for FDI100% foreign equity allowedNo Government sanction requiredAttractive incentives packageRemittance & Repatriation of Royalty, Technical & Franchise Fees,Capital, Profits & Dividends allowedNetwork of Export Processing Zones (http://www.epza.com.pk)Foreign investment fully protected
Foreign Private Investment (Promotion & Protection) Act, 1976The Protection of Economic Reforms Act, 1992Foreign Currency Accounts (Protection) Ordinance, 2001
Agreements on Avoidance of Double Taxation ( total 51 signed)Bilateral Investment Protection Agreements ( total 42 signed)
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BUSINESS OPPORTUNITIES
MANUFACTURING & AGRICULTURE
ENERGY
FINANCIAL SERVICES
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MANUFACTURING&
AGRICULTURE
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TEXTILE INDUSTRYO Fourth largest producer of cotton in the World.
O Major global player in Home Textiles as it has advantage of wide-widthweaving capacity.
O Industry operates at market based pricing and is ready for free tradeunder WTO from January 2005.
O FDI in the textile sector doubles last year.
O Facing declining prices due to lack of branding.
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TEXTILE INDUSTRY - OPPORTUNITIES
Possibilities of Joint Venture / Alliance with partners who can :Support in Branding of ProductsHelp in marketing products for global distributionRelocation of machinery with product buyback agreements
Textile Machinery export to Pakistan
Textile Accessories export to Pakistan
Textile Chemicals and Dyes export to Pakistan
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OTHER MANUFACTURING SECTOR
Packaging material for branding and retailing of products
Distillery in sugar industry (3 mn tonnes production) and itsmarketing
Production of leather footwear
Engineering and Electronic
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AGRICULTURE SECTOR
Total Agriculture is US$ 7 bn, mainly in Crops and Livestock.
Amongst the largest producers of Milk of 27mn tonnes.
Mango production of 1mn tonnes, Citrus 2mn tonnes and Apple0.5mn tonnes [Export of only 0.2 mn tonnes ( US$ 70mn )]
Fertile land with 22mn hectors under cultivation but poor farmingtechniques, lack of storage and handling facilities and nopackaging facilities.
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AGRICULTURE OPPORTUNITES
Processed food industry based on Milk and Fruit Juices(Nestle is enjoying double digit growth)
Export of fruits
Investment in infrastructure like Storage
Food Packaging Industry
Shrimp Farming
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ENERGY
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OIL & GAS
Demand Production Deficit Demand2010
Oil(b/d) 386,000 58,000
328,000Import US$
3.3 bn/yr800,000
Gas(bcf/d) 2.9 2.4
0.5Unsatisfied
demand4.2
LPG 1,200 857343
Unsatisfieddemand
1,800
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OpportunitiesGas Exploration
CNG Filling Stations
Supply of Pipes and other Distribution Network
Participation in supplying natural gas from Central Asiathrough Pakistan.
Planned privatization of Distribution Companies
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FINANCIALSERVICES
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FINANCIAL MARKETSShallow market despite favorable regulatory framework
Bank Deposits of US$25bn (40% of GDP)Stock market US$10bn (15% of GDP)Corporate Bond market US$350mn (0.5% of GDP)
Large fiscal deficits have “crowded out” private sector
Lower government borrowing will divert US$1.5bn pa for privatesector
Sector going through consolidation with small fringe players beingreplaced by large banks and specialized companies operating in nichemarket
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OpportunitiesInvestment banking to develop new products for corporateborrowers
Development and marketing of consumer financingproducts for large banks
Asset management for both equity and fixed incomeproducts
Venture capital funds
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SUMMARYMarketing of products and services
Exports of quality fruits from PakistanBranding and packaging (Textile, Agriculture)
IT infrastructure and e-Commerce
Financial Services
Physical Infrastructure (Gas exploration and distribution)
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Pakistan High Commission
Conference on Business Opportunities in Pakistan16 Dec 2002 ( organized by Pakistan High Com., ITIS & SCI )
Trade Mission to Pakistan12-17 January 2003( led by ITIS & SCI, supported by Pakistan High Com andPakistan Export Promotion Bureau )
For more information … ...
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THE END
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