BOARD OF INVESTMENTPRIME MINISTER’S OFFICEBOARD OF INVESTMENT

PRIME MINISTER’S OFFICE

GEO STRATEGIC LOCATION

2

3

Pakistan-Home to around 1000 multinational businesses

Deutsche Bank

3

Power Sector has attracted around $14 billion of FDI and 65 power projects were completed in the past two decades owing to lucrative policy incentives offered by GOP

4

• Population 188 million• 15-39y old youth population 39%• Net FDI Inflows $3 billion• Exports $ 25.2 billion• Imports $ 41.7 billion • Inward Remittances $ 15.8 billion• KSE 100 Index

• (11th May, 2013) 19,916• (17th Sep, 2014) 30,137

On road to progress: Expected to achieve annual economic growth of

over 7% within the next few years (currently over 4%)

Youth: One of the biggest youth population in the world. Educated,

skilled and trained workforce available

KSE: Stock Index was among world’s top 5 performers in 2013 – Over

100% growth in the past 18 months.

ECONOMIC INDICATORS (2013-14)

5

INVESTMENT CLIMATE

Investor Protection

• Protection of Economic Reform Act, 1992, protects foreign capital entering in Pakistan

• Legal cover through the Foreign Private Investment (Promotion and Protection) Act, 1976

• Signatory to the New York Convention; Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011

Investor Friendly Regime

• 100% foreign ownership allowed

• Full repatriation of profits, capital gains and dividends allowed

Lower Costs

• Low corporate tax and income tax rates

• Special economic zones with exemptions on custom duty and taxes on import of capital goods and income tax for a period of ten years

• Industrial estates with fully developed infrastructure

• Efficient, skilled, and low-cost labor

6

Exemption from Corporate Income Tax, Sales Tax and Import Tariff.

GOP Guarantees obligations of power purchaser and provinces

GOP provides protection against Political Force Majeure, change in law and Change in duties & taxes

GOP allows 20% ROE for indigenous coal based Power Projects, and 17% ROE on all other Power Projects (IPPs)

Tariff adjustments for variation in currency exchange rates and fuel prices

Tariff indexation for inflation (US CPI & Pak WPI)

Government ensures conversion of Pak Rupee & remittance of foreign exchange for project-related payments

INCENTIVES FOR DEVELOPMENT OF POWER PROJECTS

7

Public Sector MW %

Hydel 6,844 29

Thermal 4,829 21

Nuclear 802 3

Total 12,475 53

PAKISTAN POWER SECTOR TOTAL INSTALLED CAPACITY

Public Sector Hydel

Public

Sector Therma

l

Nuclear

Private Sector

Total Installed Capacity: 23,486 MW

Private Sector MW %

IPPs 8,630 37

KESC 2,381 10

Total 11,011 47

8

Country Distressed/Cancelled Projects (% of investment)

Malaysia 24%

Indonesia 13%

Vietnam 8%

India 3%

Pakistan 3%

POWER SECTOR INVESTMENTS

Source: World Bank PPI Database – 1990-2013

Expected International Investment Pipeline in Hydropower IPPs

International Investment in Hydropower IPPs (Examples)• China International Water and

Power Company (China) – 1,100 MW Kohala HPP

• Korea Water Resource Corporation (K-Water) and Daewoo E&C Co (Korea) – 665 MW Lower Palas Valley HPP

• China Three Gorges International Corporation (China) – 720 MW Karot HPP

• K-Water and Daewoo (Korea) – 147 MW Patrind HPP

New Bong Escape HPP – 84 MW Run of River Project• First hydropower IPP

commissioned in Mar 2013• Financed by ADB, IDB, IFC,

and Proparco (France)• Registered CDM project by

UNFCCC for carbon credits

10

• International Competitive Bidding will be carried out for the services and supplies with utmost transparency.

• Procurement of equipment and services of around $8 billion is expected in the project.

• Government is considering a Special Purpose Investment Vehicle for the development of the project.

• SPV will also own Ghazi Barotha Hydropower Project, a 1,450MW ROR project commissioned in 2002 with a cost of $2.3 billion generating over 7,000 GWh/annum.

DIAMER BASHA DAM PROJECT

11

• There is a board based consensus in Pakistan for private sector to undertake all economic projects and government to limit its role to regulation. All small and large-scale power projects are supported by all political and other stakeholders.

• Pakistan provides some of the highest dollar based rate of return on power projects of at least 17%. Compare this to our bond issue which paid 8.25%

• Government of Pakistan is open to public-private partnerships for development of large infrastructure projects with international investors

KEY TAKEAWAYS

• Pakistan will be among the fastest growing economies in the next few years

• Power, telecom and manufacturing sectors have attracted significant investments in the past two decades despite the regional situation

• Political stability, improved security and good governance are putting Pakistan on the track of rapid development and progress

KEY TAKEAWAYS

Board of Investmentwww.boi.gov.pk