Rt Hon Baroness Saeeda Warsi, Senior Minister of State of the UK,
Honorable Minister of Finance Mr. Ishaq Dar,
Chief Minister of Baluchistan Dr. Abdul Malik Baloch,
Chief Minister of Punjab Mr. Shahbaz Sharif,
Advisor for National Security and Foreign Affairs Mr. Sartaj Aziz,
Minister of State for Foreign Affairs Mr.Tariq Fatemi,
Acting High Commissioner, Mr. Imran Mirza,
Distinguished Members of the British and Pakistani Business Fraternities,
Ladies and Gentleman!
It is my privilege to participate in this important Conference, and interact with such a distinguished group of business leaders from various sectors.
I wish to keep my opening remarks brief, so that we can have maximum time for your valuable proposals and exchange of views.
The purpose of this investment conference is manifold. In the first place, it aims at apprising you of how we have turned around the Pakistani economy in less than a year. It also seeks to showcase the enormous opportunities for profitable investments that exist in Pakistan. And, it hopes to generate discussion and ideas on how to take our economy forward through structured reforms and make the environment conducive to foreign investments and growth.
As you know, Great Britain enjoys a special place in Pakistan’s foreign policy priorities. The two countries are bound by long-standing diplomatic, political and cultural ties. We remain committed to further strengthen our economic and social cooperation. I just had a meeting with my friend, Prime Minister David Cameron, who incidentally was the first head of government to visit Pakistan, after I assumed office last year. The British government has extended invaluable assistance to Pakistan in many areas, ranging from education, vocational training, health and security. DFID merits a special mention as it has been helping our provincial governments to improve the quality of education for our children and, in imparting vocational training to the youth. We have agreed to new roadmaps and targets, for enhanced cooperation in different fields.
Ladies and Gentlemen!
We are more than keen to increase British investments in Pakistan. Many of you may not even know that more than 100 British companies are doing business in Pakistan and have regularly received excellent returns on their investments. Pakistan today offers the most liberal investment regime in the region with 100% foreign ownership and no limit on repatriation of profits. We appreciate the support that UKTI and the British Foreign and Commonwealth Office, have extended in this regard, including the organization of this event.
I also wish to take this opportunity to express my appreciation for the British government’s crucial support to Pakistan, in securing GSP-Plus status in the European Union. This has resulted in duty-free access for a range of our textile and other products. We are hopeful, that continued British support would enable us to enter into a Free Trade Agreement with the EU, bringing further stability to export sector of Pakistan.
The year 2013 was the year of many transitions for Pakistan. An elected government completed its five-year term, a peaceful and orderly election was held and, by the grace of God and support of the people, our party was given a mandate, to serve the people of Pakistan. Much that I cherish the faith shown by the people of Pakistan, I am also fully aware of the enormity of the task that it entails.
When we resumed our journey to serve the people of Pakistan in June 2013, we decided to start working on two priority areas. These were, addressing the dire energy situation in Pakistan, and improving the economic outlook of the country.
Ladies and Gentlemen!
We inherited a challenging macro-economic situation with falling revenues, increased expenditures, huge fiscal deficit, frozen foreign investments, virtually paralyzed manufacturing and services sectors and above all, a complete lack of confidence of people in the State and its institutions to deliver even basic public goods and services. It was in this backdrop that my economic team worked beyond the call of duty to turn around the economic outlook. In less than a year, the macroeconomic framework has seen palpable improvement. Pressure on foreign exchange reserves and Pak Rupee parity has eased. Inflationary pressures have softened. Large scale manufacturing is showing sustained improvement. Credit to private sector has increased manifold as the government has reduced its own borrowing significantly. The foreign exchange reserves have reached 12 Billion $ approx and a sustained increase over the next year is expected. Pak rupee has appreciated significantly and the capital market’s outlook has changed positively. Our success in raising 2 billion $ from global capital market after a long absence of 7 years has further increased investors’ confidence. Pakistan appears to be firmly back on track.
Last week, we have auctioned four 3G and one 4G licenses, raising over $1.1 billion. Here, I must appreciate the efforts of our economic team, led so very ably by our Finance Minister, Mr. Mohammad Ishaq Dar.
Ladies and Gentlemen!
In view of these efforts, and the expectation of future inflows, the Pakistani rupee has gained over 10% against the dollar, and inflation has been brought back to single digit. This alone has reduced our public debt by over Rs 800 billion.
The budget deficit, which we inherited at over 8.8% of GDP, has also, in the first three quarters of this fiscal year, been brought back under control, and we hope to end the fiscal year, at a deficit of around 6% of the GDP. This has been achieved, both by an increase in tax collection, which is up by 16 percent, and a decrease in current expenditure. We have eliminated all discretionary spending, even that of the Prime Minister, and reduced our overall current expenditure by over 30%. In case of my own office, we have a target of 40% reduction over the last year’s expenditures of the former government.
Our GDP is expected to grow by over 4% this year and based on our performance in the first year we can expect to reach our first target of over 6% GDP growth in the first three years of our 5 years tenure.
On the tax revenue side, we are improving our tax administration, widening tax net, introducing greater transparency and equity into the system, so that our existing tax measures result in higher revenues and create minimal distortions in the economy. Of course, there are certain areas of the economy that are more responsive to tax measures than others, manufacturing being one of them. Hence, a positive sign has been the recent robust increase in large-scale manufacturing, which will result not just in enhanced capital formation and increased employment, but also a higher tax-to-GDP ratio. The Services sector is also coming back on track and 3G/4G licensing alone will gradually bring an additional Rs 260 Billion in tax revenue every year and also add an estimated 900,000 jobs over next 4 years. This ‘New Telecom Revolution’ will open up hitherto uncharted areas and sectors for technological interventions and investments, like e-education, e-health and financial services sectors.
Our stock market capitalization, a leading economic indicator, has increased by over 40 percent both in Rupee and US dollar terms since we were elected, adding US$ 20 billion in value. The confidence reposed both by domestic and international markets in our economic management, indicates increased growth and investment in the immediate future.
Ladies and Gentlemen!
The power sector in Pakistan gave a very grim picture in June 2013. In over 65 years of our existence, we were able to reach an installed capacity of around 23,000 MW but an effective generating capacity of only 14,000 MW. The rapidly increasing demand of a growing population coupled with gross mismanagement and corruption, the power sector was in a state of ‘accelerated collapse’. The industrial working was reduced to a single shift and the domestic consumers were faced with up to 16 hours of load-shedding in peak summer days. In the last ten months, we have added more than 3000 MW of operational capacity to the national grid. Another 900 MW will be added by October this year. This has increased industrial working to 2 shifts and reduced domestic load-shedding by more than 50%. However, even this is not enough to meet our current needs. We have therefore finalized the roadmap for installing 21000 MW of cheap energy in the short and medium terms. Most of this will come from coal and hydel, which will significantly reduce the currently prohibitive cost of the energy basket to affordable levels. We are also setting up an LNG import terminal in the private sector, which will allow us to replace costly furnace oil with relatively inexpensive LNG. Planning for an additional LNG Terminal at Gawadar Port is also in the final phase. While most of our generation capacities are coming up in the private sector, we are also resolved to privatize the distribution network, which has remained one of the problem areas of power sector for a long time. The current average distribution losses of up to 13% and recovery shortfalls of up to 22% create the basis of the circular debt, which we remain committed to address on priority basis. Coupled with the rationalization of tariff, these reforms will make investments in the power sector, whether in the generation or distribution, an extremely profitable venture.
Ladies and Gentlemen!
Chairman BoI has already showcased some of our landmark projects in various sectors during his presentation. Each one of these sectors offers huge investment opportunities with virtually incomparable rates of return. I am sure that you will be excited to explore some of these areas for your future investments.
A serious drain on our resources is the losses, incurred by the public sector enterprises. The obvious solution for this is privatization. Now that our stock market has performed well, and international and local investors have shown confidence in our governance, we have confidently begun the process of privatization.
The Financial Advisors have been appointed, for selling partial equity in the largest state-owned companies. We are expecting many business leaders to come to the auction block, to take charge of the mismanaged companies which only require better management practices for a turn-around. I invite all of you to participate in this process, which would be absolutely transparent and strictly in accordance with international best practices.
Ladies and Gentlemen,
I recognize that Governance is all about policy choices. My choice, reflective of my vision for Pakistan, has always been to take the politically tough calls. By electing me to be their Prime Minister for the third time, the people of Pakistan have given me a great privilege. But it is also a huge responsibility. It is, therefore, my firm resolve, to take the path leading to increased prosperity for our people, for better health and education for our children, for a tolerant society, for an open and vibrant culture, and for a stable and peaceful Pakistan. I count on my friends in this country to march with us, in this challenging and yet fulfilling journey, towards building a better Pakistan.
I thank you Ladies & Gentlemen for your patient indulgence.