Pakistan: underinvested

Via The Financial Times, a brief analysis of the investment potential in Pakistan given recent events:

“…If the US Department of State follows up on its pledge to pay $25m in reward money for information leading to the capture of Osama bin Laden, then perhaps somebody, somewhere, is in line for a mega-windfall, equivalent to more than half of the money foreign institutional investors have put into Pakistan’s stock market so far this year.

As the world’s sixth most-populous nation Pakistan has a strong secular growth story. It also has a relatively attractive tax and investment climate: the World Bank rates it the 85th most business-friendly country in the world, ahead of regional rivals Sri Lanka (102), Bangladesh (107), Nepal (116), India (134) or Afghanistan (167). Yet the country’s precarious security situation means that foreign capital continues to steer clear. The killing of America’s most wanted – not just deep inside the country, but in a large compound in an affluent satellite town of the capital, Islamabad – is unlikely to change that. Net equity inflows of just $43m so far this year account for just over half of one per cent of total net inflows across Asia excluding Japan. On the basis of the first nine months to March, total foreign investment inflows – Greenfield investment plus privatisation proceeds – in the current fiscal year will be the lowest since 2005.

Pakistan’s oil and gas sector is perhaps the best example of consistent underinvestment, as much of the country’s energy wealth is bound up in the strife-torn provinces of Baluchistan and Khyber Pakhtoonkhwa. The latter’s budget for the year to June says it all: Rs6bn ($71m) of net profit from generating hydroelectric power; Rs15bn of central-government grants for fighting terror. Until that ratio is inverted, Pakistan will remain a land of threats, not opportunities.

This entry was posted on Monday, May 2nd, 2011 at 7:46 am and is filed under Pakistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.