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PAKISTAN: An Introduction

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Pakistan: An Introduction 

With its geostrategic location, positive economic outlook, increasingly large urban workforce, fiscal incentives and liberal foreign investment policies, Pakistan remains an attractive foreign policy investment option. The country’s consistent policy developments aim to provide a comprehensive framework for creating a conducive business environment for the attraction of foreign direct investment (FDI), which can evidenced from the fact that year on year FDI has shown a growth of 12.6% in financial year 2018 (FY18) as compared to the same period of the preceding year.

Although Pakistan presently faces a current account deficit and export demand crisis, the country’s gross domestic product (GDP) at factor cost grew at 5.8% in FY18 – an increase of 0.4 of a percentage point over the previous year. It is presently a top-ranking country in South Asia for private infrastructure investments and also remains one of the world’s top five private participation in infrastructure (PPI) investment destinations.

Telecom and e-commerce 

The telecom and e-commerce sectors and the digital economy of Pakistan have continued to grow over the last year. During the first two quarters of FY18, revenues from the telecom sector reached an estimated value of PKR235.5 billion. Additionally, the broadband penetration increased from 32.39 million in 2016 to 62 million in 2018. A key development in the telecom sector is the completion of the Pak-China Optical Fiber Cable Project under the China Pakistan Economic Corridor (CPEC), which gives China an alternate and shorter access for transit telecom traffic to Europe, the Middle East and Africa.

Pakistan’s digital economy has immense potential for growth with mobile penetration of 70%, mobile broadband penetration of 19.2%, and a formally financially served adult population of 23%. The Government’s commitment to drive sustainable economic development is demonstrated though its draft Digital Pakistan Policy which sets a specific goal to “generate sustainable innovation, entrepreneurship and employment opportunities for the Nation’s rapidly growing generation of technologically sophisticated and entrepreneurial population.”

In cognisance of the global developments in digital trade, the Ministry of Commerce is in the process of finalising a Policy Framework to deal with the regulatory regime, payment infrastructure, logistics and taxation issues related to e-commerce. The Ministry of Commerce has also formulated an “e-Commerce Policy Board” under the chairmanship of the Minister of Finance to monitor progress and facilitate cross-institutional efforts. The rise of online platforms in the private sector has made the e-commerce market of Pakistan lucrative for foreign investment in the digital sphere. Successful ventures include, which recently managed to secure an investment of USD55 million, and Careem, which has raised an investment of USD60 million. The world’s largest e-commerce company, Alibaba, has also shown an interest in the Pakistani market by signing an MoU with the Trade Development Authority of Pakistan to bring small and medium enterprises into the realm of the e-commerce platform. The estimated size of Pakistan’s e-commerce market falls between USD60 and 100 million (2015) and is expected to grow up to USD1 billion by 2020.

Infrastructure and energy sector 

The implementation of CPEC in the past few years has been an instrumental driver for economic development in Pakistan. To further its objectives, the Minister of Planning, Pakistan and the Chinese Ambassador to Pakistan jointly launched the CPEC Long Term Plan which will stay effective till 2030. The Plan provides macro guidance for the implementation of CPEC and identifies key areas of collaboration including but not limited to energy, infrastructure, connectivity, trade and financial cooperation.

Presently, there are 21 active, proposed and potential CPEC projects relating to the energy sector, out of which financial close has been achieved for ten projects. The Sahiwal Coal Power with an installed capacity of 1320 MW was completed in a record time of 22 months and started operating in 2017. Additionally, the Port Qasim Coal Power Plant Project was also launched in 2017. Given the recent achievements on the generation side, to account for energy supply deficit, government policies are expected to shift their focus towards the electricity distribution sector.

In the infrastructure sector there are five ongoing projects whereas there are 28 other development projects in progress. Additionally, as part of the CPEC initiative, nine SEZs have been proposed to be set up across Pakistan including in ICT, Punjab, AJK and GB.

To promote domestic and foreign private investment in infrastructure and to increase the availability of public infrastructure through a fair and transparent procurement process, the Public Private Partnership Authority (PPPA) has also been set up by the Federation of Pakistan during FY18.

Capital markets 

The Stock Markets presented a mixed trend in relation to their performance between July and December of FY 2017, but the PSX-100 index resumed momentum from the start of January 2018. As on March 30, 2018, the PSX-100 index closed at 45,560.30 points whereas market capitalisation was PKR9,370.6 billion. Based on the improved macroeconomic indicators and government’s investment friendly policies, Pakistan has also been upgraded to the Morgan Stanley Capital International (MSCI) Emerging Markets Index.

Significant strides have been made in developing and promoting the corporate and capital markets in Pakistan. The beginning of FY18 was marked with revamping of the country’s corporate laws through enactment of the Companies Act, 2017. The main focus of the new law is facilitating the corporate sector, strengthening the regulatory framework, maximising the emphasis on the use of technology, abolishing unnecessary requirements, protecting the interest of shareholders, and creating a softer regime for companies. In addition to the abovementioned overhaul of corporate law, several measures have been undertaken to develop and promote investment through the capital markets. Examples of such measures include the Futures Market Act, which contains dedicated provisions for derivative markets and is designed to protect public interest through a system of effective self-regulation of futures markets/clearing systems, and amendments in the regulations governing public offering in Pakistan, so as to promote quality listing.

A centralised e-portal (CES) for public listing has also been introduced and developed through the Central Depository Company Pakistan Limited, in collaboration with 1LINK Guarantee Limited. Through the CES, investors can submit an application electronically via the internet, ATMs and mobile phones for subscription of securities of companies offered to the public.

Dispute resolution 

The process of dispute resolution, litigation in particular, is fraught with difficulties. The judicial system, which consistently faces a shortage of arbiters, is encumbered by the number of new cases initiated annually (with virtually no costs being imposed on frivolous causes) as well as the existing pendency of cases. However, a number of steps have been initiated by the current Chief Justice and, in addition thereto, by the new Government to improve the efficiency of the justice system in Pakistan.

The original jurisdiction of the Supreme Court has been exercised liberally in matters of public importance during the last year or so (and it has touched upon and decided several matters of commercial significance as well).

The new legislative regime in Pakistan to give effect to the New York Convention and the International Convention on the Settlement of Investment Disputes between States and Nationals of other States has made it difficult for the courts to refuse to refer a matter to arbitration and has also curtailed the discretion available to the courts to refuse to give effect to a foreign arbitral award. The jurisprudence being developed by the superior courts also gives effect to the intention of the legislature.


The current Government developed a new privatisation programme for the prospective privatisation of 62 PSEs including PSO, OGDCL, PPL and PIA. The list also included the Ministry of Commerce’s subordinate departments. Subsequently, the Government reduced its list and decided to curb privatisation at this stage limiting it to the privatisation of SMEs. Since the start of FY18, privatisation of only eight different state-owned entities was approved by the PC and the Cabinet including but not limited to First Woman Bank Limited, Lakhra Coal Mines, SME Bank Limited and Mari Petroleum Limited. The privatisation plan is expected to grow and pick up speed with the new Government in Pakistan.

Acquisitions and joint ventures 

Lucrative investment opportunities in conjunction with a favourable regulatory regime have attracted foreign investment through either the acquisition of majority stakes in Pakistani companies or the introduction of foreign products and services through joint ventures with local entities.

In the current year, a number of key players have acquired or expressed interest in acquiring majority stakes in Pakistani entities across different industries. A merger of Sindh Bank and Summit Bank is being considered. JS Group is expected to acquire 48% shareholding in Habib Coastal Power. Additionally, Uber is in talks with Careem to acquire the majority stake. The Government of Pakistan is also contemplating the merger of Pakistan LNG Limited and Pakistan LNG Terminals Ltd. It would be noteworthy to mention that Inner Mongolia Yili Group Co has expressed interest in acquiring a 51% stake in Fauji Foods. Both parties have confirmed and acknowledged Yili Group’s interest in entering negotiations. Subject to approval, this transaction will be the second major acquisition in Pakistan’s formal food sector by a foreign firm.

Amongst the significant acquisitions that materialised in the last financial year are Alibaba’s acquisition of in an estimated USD200 million deal and Martin Dow Limited’s acquisition of Pakistan’s operation of German Merck KGaA. Numerous other instrumental transactions have occurred in the oil, gas and power sectors. Notably, Vitol Group increased its shareholding in Hascol Petroleum Limited, Pakistan to 25% on the basis of the economic growth and expansion in the energy sector. Puma Energy has also concluded a successful agreement with Chisti Group to acquire 51% interest in Admore Gas Pvt. Ltd (Admore). Additionally, security clearance has been granted by the Government to Shanghai Electric Power Company (SEP) for purchase of 66.40% shares of Karachi Electric Supply Company (KESC).

In relation to joint ventures PARCO, a joint venture project between the Government of Pakistan and the Emirate of Abu Dhabi through Mubadala Investment Company, has awarded a PMC services contract to TechnipFMC for the construction of a refinery near Karachi. Furthermore, the Sindh Engro Coal Mining Company (SECMC) signed a master shareholder agreement and loan financing agreements worth USD500 million with leading corporations in Pakistan and China and pursuant to this the company was expected to start producing coal in 2018.