UAE keen to increase investment in Pakistan By Faryal Najeeb

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Trade and Investment from “Dilmun” to “Melhulla” is nothing new. It used to be barter, and then “Kawris” were used. Then the Mughal Mohors were exchanged. Then the Rupees was used across the gulf during British times. Trade between the Pakistanis and the Arabs of the United Arab Emerites have been going on for more than 5000 years. A few balsts cannot stop arrangements that have been going on for decades and centuries. With Oil prices at a record $100 per barrell, the Arabs will have more than $400 Billion in cash. After the Duabi Ports fiasco, this cash is not flowing back to the States as it used to. This cash is now being invested in countries like Pakistan.

UAE keen to increase investment in Pakistan By By Faryal Najeeb, 1/22/2008

KARACHI: The United Arab Emirates (UAE) has set Pakistan well amongst its potential list of investment opportunities when it announced last year to double its endeavours to a staggering US$26 billion as trade between the two countries reaches the $5 billion mark.

Chairman, Pak-UAE Business Council, Mirza Ikhtiar Baig pointed out that the UAE was making heavy investments owing to increase in oil prices which have led to additional $400 billion revenue entering into the Gulf region of which the UAE is an active member. “Last year, the UAE invested $3 billion into our country which when compared to the $400 billion is insignificant and which can triple in figures.” He added that Pakistan was their first choice as the market of the country was not saturated like that of most other countries and it being a third world country offers them better economies of scale than the western countries.

Also since Pakistan is closer to the UAE and is ideally geographically placed, it benefits the Arab country to target it for its investments. He said the council was formed a year back by the foreign ministers of both the countries keeping in view the growing number of investments between the countries. Baig added that though the political instability and the dismal law and order was a major turn off for any foreign investors, the UAE was eager to continue with further investments and is searching to enter unexplored markets.

As major groups continue to participate in Pakistan’s privatisation programme, the UAE already has investments worth billions of dollars in various sectors of Pakistan such as housing and real estate, telecommunication, banking, mineral exploration, oil and gas, information technology and tourism. Other UAE investments in Pakistan are in the fields of airlines, financial business, hotels and tractors.

The UAE is Pakistan’s second largest global trading partner and it is also the second largest source of home remittances from Pakistani expatriates. The most notable investments that the Arab country has made into Pakistan includes two in the telecommunication sector where Etisalat acquired management control of the largest telecom entity – the PTCL while Warid Telecom is the fourth largest mobile service provider in the country. Wateen, a subsidiary of Warid Telecom, has earned a milestone in the telecommunication industry by being the first to introduce Wi-Fi (wireless) internet into Pakistan which is also being well received by the public.

In financial sector, Abu Dhabi Group has bought banks in Pakistan such as AlFalah and United Bank Limited while Dubai investors introduced the Dubai Islamic Bank and Emirates Global Islamic Bank which according to its marketing director, Danish Fazal, is rapidly gaining significant market shares. Fazal further stated that the Emirates Investments Group, which owns Emirates Global Islamic Bank, also have ventures in the insurance sector namely Takaful Pakistan Limited and in the real estate project of Karachi Financial Towers. Al-Ghuran is another UAE based real estate which plans to invest Rs45 billion in construction and real estate business in the near future. Similarly Al-Ghurair Giga announced last year the multi million Goldcrest DHA Islamabad project.

Emaar has also turned its attention towards Pakistan and has multi purpose projects worth $2.4 billion in Islamabad and Karachi which would be completed in the next five years. Emaar and Pakistan’s Port Qasim Authority are also in the process of undertaking a mega joint-venture project to develop an area of 12,000 acres of land into a modern city near Karachi.

Pakistan and the UAE have also entered into a landmark agreement envisaging construction of $5 billion oil refinery at Khalifa Point and renewal of soft loan of $265 million for the construction of dams in Pakistan. According to its website, the project, which would be known as Khalifa Coastal Refinery, would be set up at Khalifa Point in Gwadar and is expected to have a production capacity of 200,000 barrels a week.

Abu Dhabi government-owned International Petroleum Investment Company (IPIC) will hold a 74 per cent stake in the Khalifa Coastal Refinery joint venture, with Pakistan’s Pak-Arab Refinery (PARCO) holding the remainder. The construction work on the project will start in December 2008 with a planned production from 2012. This is the largest single country commitment for investment in different sectors of Pakistan’s economy and has the potential not only to make UAE one of the major economic players but would also open up new vistas of development in Pakistan.

About 400,000 Pakistanis are living and working in the UAE who are a source of strength for the Pakistan-UAE relations. Pakistan attracted world attention during the last five years as it made significant economic progress owing to continuity in policies and a rapidly strengthening GDP. Supported by a growing large scale manufacturing sector and services sector, private sector investments into the country helped it to have a stable growth.

Trade statistics of last five years revealed an encouraging trend in bilateral trade between Pakistan and UAE. The trade volume which was $1.4 billion in 1999-2000 increased to $2.8 billion in 2004-2005, depicting 20 per cent growth per year. Trade between the UAE and Pakistan reached new heights as it posted significant growth to cross $5 billion mark following a surge in exports across the sea in 2007. The increase in overall exports has come primarily from non-traditional exports items accounting for 67 per cent of the increase followed by 35 per cent from textile manufacturers and four per cent from other manufacturers.

Baig was of the view that while exports were increasing, the Balance of Payments (BoP) yet remained in favour of the Arab country. “The BoP does not present the true picture as much of the imports that are brought into the country from the UAE are those which are actually manufactured elsewhere such as India and Bangladesh and is imported via Dubai.” Petroleum imports are another reason for this imbalance, he continued.

Baig said the UAE could play a major role in the primary sector of Pakistan such as livestock which needs to have foreign investments to ensure its uplift. The largest turnover of Pakistan during 2006-07 was with the USA followed by the UAE, China, Saudi Arabia, Germany, Japan, Kuwait, United Kingdom and India. Approximately eight per cent of Pakistan’s exports are to UAE, making it the second-largest destination for Pakistani exports.