{"id":1230,"date":"2016-11-08T16:24:12","date_gmt":"2016-11-08T16:24:12","guid":{"rendered":"https:\/\/cpectrade.co.uk\/?p=1230"},"modified":"2016-11-08T16:24:12","modified_gmt":"2016-11-08T16:24:12","slug":"chinas-billions-luring-once-shy-foreign-investors-to-pakistan","status":"publish","type":"post","link":"https:\/\/cpectrade.co.uk\/?p=1230","title":{"rendered":"China\u2019s Billions Luring Once Shy Foreign Investors to Pakistan"},"content":{"rendered":"

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After years of flat direct foreign investment, it has taken China\u2019s pledges of\u00a0billions<\/a>\u00a0to get overseas companies to start looking beyond Pakistan\u2019s negative headlines on security challenges and power outages.<\/p>\n

While investment into Pakistan has been little changed in the three years since Prime Minister Nawaz Sharif was elected, companies including Turkey home appliances maker Arcelik AS and Dutch dairy giant Royal FrieslandCampina NV are making acquisitions in Pakistan.<\/p>\n

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PM Pakistan Nawaz Sharif<\/div>\n<\/figcaption><\/figure>\n

Along with a military crackdown against militants following a 2014 school massacre and the government\u2019s plans to end power shortages by 2018, it is China\u2019s vote of confidence in the country that has boosted investor confidence. It pledged $46 billion in soft loans and investments in a so-called China-Pakistan Economic Corridor, or CPEC, announced last year.<\/p>\n

\u201cPakistan has turned the tide,\u201d said Mattias Martinsson, the Stockholm-based chief investment officer at Tundra Fonder AB, which holds about $160 million in Pakistani stocks. \u201cThe CPEC agreement was probably the trigger for many investors to actively start looking. We all know China does not take short term decisions.\u201d<\/p>\n

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New power plant projects fueled by Chinese investment are expected to help with Pakistan\u2019s chronic outages and pave the way for investment in other industries. Consumer companies are taking the lead to cater to the world\u2019s sixth largest nation by population.<\/p>\n

\u201cIf you look at demographic and population, it\u2019s just a great place to be,\u201d said Naz Khan, Chief Financial Officer at Engro Corporation Ltd. whose food subsidiary is being bought by Dutch dairy company FrieslandCampina, which is looking to take a 51 percent stake in a deal valued at about $545 million at the Nov. 4 closing.<\/p>\n

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A motorist drives on an unlit street during a power cut in Karachi in July 2015.<\/div>\n
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Consumer Spending<\/h3>\n

Consumer spending in Pakistan has increased 83.4 percent in the past five years compared with 48.7 percent in the Asia-Pacific region, according to data by\u00a0Euromonitor International, a consumer research firm. Its forecasts show Pakistan\u2019s disposable income has more than doubled in six years.<\/p>\n

\u201cIts young population, increasingly growing economy, makes it an enticing prospect as a market in the region,\u201d Polat Sen, chief financial officer at Arcelik, said by e-mail. \u201cPakistan is on the verge of an investment-led growth cycle.\u201d<\/p>\n

Arcelik is scheduled to complete its purchase of Pakistan\u2019s home appliance maker Dawlance for $243.2 million this month. It plans to focus on the local market and closely evaluate opportunities in the current export markets of Dawlance, according to Sen.<\/p>\n

Pakistan\u2019s government expects the economy to grow at the fastest pace in a decade after completing an International Monetary Fund loan program that averted a balance of payment crisis and boosted foreign exchange reserves to a record level. The economy is expected to grow around five percent annually for the next three years and Arcelik plans to keep its sales growth above that, according to Sen.<\/p>\n

Moment for Pakistan to be Among Top Emerging Economies: IMF\u2019s Lagarde<\/p>\n

Despite the optimism, Pakistan\u2019s political outlook remains tricky with some some observers questioning the\u00a0military\u2019s control<\/a>\u00a0over the country. The army has cracked down on militants but attacks are continuing, with at least 61 killed last month when three armed men wearing suicide vests broke into a\u00a0police<\/a>\u00a0academy.<\/p>\n

And multiple economic challenges remain. The\u00a0nation\u2019s overseas shipments for the year through June fell to the lowest level since 2010, current account has more than doubled in the quarter ending September and less than one percent of the population are registered tax-filers.<\/p>\n

\u201cForeign investors are definitely interested. I think what is stopping them from jumping over the wall is element of unpredictability,\u201d said Shahab Rizvi, president of the Overseas Investors Chamber of Commerce and Industry, whose members include local units of GlaxoSmithKline Plc and Coca Cola Co. \u201cI mean government policies tend to change, primarily regulatory policies such as taxation. These actually move like a pendulum.\u201d<\/p>\n

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