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November 2012
INVEST IN PAKISTAN
- The Time is NOW!
2
Pakistan at a glance
Population ~ 177 million
Currency Pak Rupees
Exchange Rate PKR 95.5: USD 1
Adult Literacy Rate 56% (2008-09)
Exports USD 22.64 Billion (2011-12)
Imports USD 36.52 Billion (2011-12)
Major Crops Cotton, wheat, rice, millet & sugarcane
Religion Islam 95%, Other 5%
GDP Growth Rate 2.4% actual FY 10
GDP Per Capita USD 1,254
Forex Reserves USD 15.41 billion FY 11-12
FDI USD 0.812 billion FY 11-12
Inflation 12.9% FY 09-10
Source: State Bank of Pakistan, Federal Bureau of Statistics
3
Pakistan, The Future Metropolis of Asia
4
Doing Business in Pakistan
Global Ranking Pakistan India
Ease of doing Business 105 132
Protecting Investors 29 46
Starting Business 90 166
Trading across Borders 75 109
Financial Attractiveness Index 4th 8th
Source: IFC, The World Bank, A.T. Kearney’s Global Services Location Index, 2011
* A lower number shows better performance
5
Where to Invest in Pakistan?
Energy
Construction & Real EstateAgriculture
Education
Mining
6
ENERGY
7
Pakistan is one of the emerging economies of South Asia, where the
government has declared the Power Sector as its top priority of
investment.
The Government of Pakistan is taking all the necessary measures to
build a more conductive environment, by simplifying procedures to
facilitate potential investors.
At present Pakistan’s total installed generation capacity from
Hydroelectric, Thermal, Independent Power Producers, and Nuclear
sources stand at 19, 754 MW.
The existing capacity of Thermal power generation in Pakistan stands at
12, 630 MW, which is almost 2/3 (64.6%) of the country’s total
generation.
Hydroelectric energy is the second largest source of electricity, and
accounts for 33.1% of total power generation in the country.
The rapid economic growth over the past few years has led a power
shortage in Pakistan, and the country today is looking for investment in
power production to meet its short and long term power needs.
Power ON
Quench The Thirst for Power !
Demand & Supply Electricity demand: 6% during FY2008-09
Installed Power Generation Capacity
19,754MW in FY2008-09
Major players with installed capacity
Thermal Central Power Generation Company Ltd. At Guddu
Hydel Plants Turbela plant (3.05GW), Mangla (1GW), Warsak (240MW), and Chashma (184MW)
IPPs – thermal Kot Addu (1GW); Hubco (1.3GW)
Nuclear Chashma-1(300MW) and Kanupp (125MW)
Electricity Supply WAPDA & KESC
Source: BMA Research
8
Eco Friendly Power Generation
Wind Energy_’The Green Way’
On a Windy day countries like India, with only a ‘Good’ category wind speed
of 6.6 m/s, produces 9600 MWh of wind electricity. Likewise, China with also
a ‘Good’ category wind speed of 6.6 m/s, produces 12,200 MWh of wind
electricity.
Amazingly, due to it’s ideal geographical location, Pakistan falls under the list
of countries with ‘Excellent’ category wind speed of 7.7 m/s.
As per a USAID Report, Pakistan can potentially produce 132,000 MWh of
wind energy. The wind corridor, in Sindh province, alone has the ability to
generate 40,000 MWh of wind electricity. When it comes to investments in
wind power energy projects, Pakistan is a country, where sky is the limit.
In this investment, the ratio of Debt to Equity is 80:20, with a guaranteed
return on equity, by the government, in the form of partial paybacks of fuel
costs, operations and maintenance cost, and taxes/duty.
Source: USAID
9
100% Clean & Natural Source of Energy
Germany produces ~24,700 MW of power with a solar irradiation level of just
1,000 – 1,100 KWh/m2 /yr., while Pakistan having double that irradiation level,
produces ‘zero’ solar power.
To litmus test the potential in this type of investment compare the following
countries who are already cashed in Solar Power:
Australia, with a solar irradiation of 1,000–1,100 KWh/m2 /yr, generates 1,200
MW of electricity.
China, with a solar irradiation of 1,679 KWh/m2 /yr., generates 2,900 MW of
electricity.
In Pakistan, Southern Punjab, Sindh, and Baluchistan holds the biggest potential
for solar power investment. Reason:
Significant portion of Pakistani population is currently living in isolated villages,
which are far from the national grid.
Widespread availability of unexploited land.
High demand, suitable weather conditions, and Low recurring cost, makes solar
power the ideal way to generate electricity.
Source: BMA Research
Solar Energy – The Sun is a Blessing
10
With coal reserves of 20bn tons, only half the size of Pakistan’s proven
reserves, coal contributes 62% in Czech Republic’s energy mix.
Whereas, Pakistan’s energy mix is still coal‐free. Even though Pakistan’s
inferred coal reserves are 57bn tons, and Pakistan’s hypothetic coal
reserves are estimated 175bn tons.
Coal is used as the primary source for electricity generation by regional
power houses.
Countries like China, with coal reserves of 114.5bn tons – use coal for 81%
of their energy mix.
India’s coal reserve of 60.6bn tons, has a 68% share in its energy mix.
Pakistan’s coal reserve has ‘ZERO’ contribution in it’s energy mix. Hence,
there is a substantial room for investment considering , Abundant coal
reserves, and a guaranteed 17% USD based return.
Coal Electricity – Plentiful yet ignored
Power Deficit is A Golden Opportunity
Source: Barrick Gold Research
11
MINING
12
Moving Mountains
An Overview of the Minerals & Mining Sector in Pakistan
Mining & quarrying accounted for 11% of Pakistan industrial production in 2010, and output from mineral industry was 2.5% of GDP1
More than 1344 mineral concessions have been granted till Dec 2008 to various private/public sector firms2
Abundance of Natural Resources; Mineral reserves and extractions stats include:
Coal - inferred reserves: 57bn tons, hypotheticreserves: 175bn tons
Gold – 25mn ounces reserves in Rekodiq, Baluchistan3 only
Natural gas – extraction 30.9 Mn Cu. M (July 08-Mar 09), reserves 1.76 trillion cubic M1
Copper - 32bn pounds found in Baluchistan’s Tethyanbelt3
Granite - 1.5bn tons of reserves Gypsum - extraction 532,000 tonnes Crude Oil - extraction 24 mn barrels, unexplored
reserves 3.5bbl 1
Limestone - extraction 24500 tonnes Rock Salt - extraction 1.38 mn tonnes
More than 50 base metals and non-metals discovered in Baluchistan (2007-08)
Source: 1. CIA World Factbook2. Board of Investment, Pakistan3. Barrick Gold Research
13
Mining - an untapped investment arena
Minerals & Mining Sector in Pakistan
Mineral Potential of Pakistan though recognized as excellent is still inadequately developed; contribution to GNP at presents stands at 2.4%
Exploration activities are in progress with foreign investors. About 79 mineral titles1 including Reconnaissance, Exploration and Mining leases have been granted under large-scale mining in Baluchistan.
Pakistan Government & Pakistan Mineral Development Corporation welcomes foreign/local joint ventures in:
Gold & Base Metals exploration in North Pakistan Coal Briquetting Plant Coal mining for small thermal power plants Production of ultra refined salt
Mining offers an untapped arena in Pakistan offering huge investment opportunities with high success ratios2, as illustrated in the graph
Source: 1. Board of Investment, Pakistan2. US Geological Survey Yearbook 2010
14
Production Statistics
Pakistan Mineral Commodities
Commodity 2009 2010
Coal, all grades (000 M Ton) 3608 3600
Coke (000 M Ton) 320 330
Natural Gas: MNM3
Gross Production 41,658 42,000
Natural Gas Liquids (thousand 42-gallon barrels) 750 760
Crude Petroleum (thousand 42-gallon barrels) 23,870 24,000
Petroleum Refinery products (thousand 42-gallon barrels)
89,300 92,500
METALS & INDUSTRIAL MINERALS
Bauxite (M Tons) 11,500 32,000
Chromium Ore (M Tons) 174,000 120,000
Cement (Thousand M Tons) 28,000 30,000
Fire Clay (M Tons) 359,000 360,000
Aragonite & Marble (M Tons) 1,105,000 1,200,000
Dolomite (M Tons) 190,000 250,000
Talc (M Tons) 34,000 35,000
Source: US Geological Survey Yearbook-2010
15
CONSTRUCTION
16
Build a Better Tomorrow
An Overview of the Construction Sector in Pakistan
Construction industry of Pakistan had a total value of approx. USD 3.6 billion in 2009.
Expected projection for 2012 is USD 4.2 billions1.
Thickly populated big cities of Pakistan include Karachi, the world’s 3rd most dense city with a population density of 19,000 persons/sq.km
Increasing income levels have increased the affordability of the masses
Rapid appreciation in land prices in mega cities with continuous upward trend in rental revenues
Developing real estate at suburbs with cheap land prices has emerged as a sustainable occupation
High land prices have restricted villa development and is giving rise to high-rise apartment complexes and condominium growth
Sprawling shopping malls offer lucrative investment opportunities i.e. retailing, and are important congressional places for dining and relaxation activities
Developers are diversifying their risks in big cities and opting for mixed use developments, with high-end residential, hospitality, office and retail spaces offered under one roof.
Source: Board of Investment Pakistan
17
Investor Friendly Environment & Construction Policies
Construction Sector Potential
The construction industry in Pakistan has tremendous potential; with a sizeable proportion of
trained professionals, i.e.
Approximately 80,000 graduate engineers
20,000 licensed constructors
1,000 registered civil engineering consultants
GoP has announced investor friendly duties and tax regimes for construction sector,
which includes:
All new construction of houses on plots measuring up to 150 sq.yrds and flats measuring
up to 1000 ft2 have been exempted from all types of taxes for 5 years.
Banks & DFIs will extend credit facilities for balancing, modernization and replacement of
machinery used for construction and housing industry.
Import of plant/machinery/spares by construction & housing companies, not manufactured
locally, shall be exempted from custom/import duties in excess of 10%
Construction companies shall be charged via presumptive tax regime not exceeding 1% on
yearly receipts
Stamp duty/registration fee for housing mortgage has been rationalized
Source: Board of Investment Pakistan
18
AGRICULTURE
19
Why Agriculture:
Weather patterns are changing quite rapidly affecting the crops
globally
The gap between supply and demand is huge, with grain
inventories falling to their lowest levels in 40 years
There has been an underinvestment in agriculture for the last 25
to 30 years with grain consumption increasing rapidly
Potential Bread basket for the Region
Agriculture
20
Potential Bread basket for the Region
Agriculture
Source: FAO, BOI
Why Pakistan?
Pakistan has a rich and vast natural resource base, covering various ecological and
climatic zones
Great potential for producing all types of food commodities
Immense Potential for Corporate Farming which translates into >25% ROE for
entrants (Engro Foods, Nestle)
100 percent foreign equity allowed on case-to-case basis.
No upper ceiling on land holdings. The size of the proposed corporate farm may be
left to be determined by the prospective investor
State land can be purchased or leased for 50 years through open auction,
extendable for another 49 years
Agriculture Income Tax regime applicable in provinces, on income from agriculture,
would be applicable to CAF.
Zero percent Customs Duty and sales tax on import of agricultural machinery and
equipment
21
A Snapshot
Agriculture
Source: FAO, BOI
22
Investment Opportunities
Livestock and Fisheries
Source: BOI
23
EDUCATION
24
Educate The Future of Pakistan
Invest in Millions
Pakistan, a nation of almost 180 million people, have 35.4% of it’s population between ages 0-15, and 60.4% are
between 15-64 Years of age, out of which only 54.9% of Pakistanis ages 15 and over, can read and write.
With a high percentage of young Pakistanis, and a very low literacy rate, our country needs a complete education
makeover.
Not too long ago, Pakistan was only allocating 2.7% of it’s GDP on education, but now it has approved a new
education policy, which suggests raising the annual education budget to 7% of GDP, and increase the literacy rate
to 83% by 2015. Golden opportunity for investment in education sector.
Investment is vital and fruitful for an education system like Pakistan with only a few universities catering to over
180 million people, with a limited number of teaching staff and resources, and a very high student dropout rate.
There is a huge room for expansion in technical institutes, because an overwhelming majority of the school
dropouts continue to go to waste with no future for them.
Such a waste of talent is happening only because of lack of attention to vocational schools that can help in capacity
building as well as institutionalize large number of otherwise uneducated labor.
It is a fact despite 25 percent unemployment in Saudi Arabia, it still has an insatiable appetite for South Asian
Technical work force.
The Middle East is crying for skilled workers which Pakistan can provide, by jumping on the opportunity to open
vocational training centers, and educating the youth.
A little attention, and capital in the Education and Vocation sector, will pay huge dividends. Turn a piece of rock
into a beautiful diamond.Source: CIA Factbook
25
THE TIME IS NOW
Abundant Land & Natural Resources
Geo StrategicLocation
Large & Growing Domestic Market
Low cost and Trained Work
Force
Good Climate & Welcoming Culture Well Established
Infrastructure
Liberal Foreign Exchange Regime
Favorable Investment Policies