ADDRESS BY AMBASSADOR JEHANGIR KARAMAT

ON PAKISTAN – US BUSINESS RELATIONS
AT THE CENTER CLUB, ORANGE COUNTY, LA
(AT 1200 HOURS ON THURSDAY, MARCH 10, 2004)

It is a great pleasure for me to be among this gathering of promising leaders of the business community. Your presence here is a manifestation of your interest in Pakistan and your desire to explore the ever-increasing opportunities offered by the economic turnaround of the country.

I would like to begin by thanking you for providing me this opportunity to share with you my thoughts on the increasingly important issue of Pak-US business relations.

The long standing ties of friendship between Pakistan and the United States are based on shared values, common perceptions on major international issues and identical ideas about peace and security in the world. Our immediate alignment to the international coalition in the war against terrorism and our rejection of terrorism in all its forms and manifestations was in fact a reflection of the commonality of views between the two countries.

Pakistan’s role as an important ally of the US and President Musharraf’s commitment to eliminate terrorist elements is evident from the fact that former Secretary of State Colin Powell once said that he talked to President Musharraf more than any other leader during his tenure. It is hoped that the long term US commitment in Pakistan will not only ensure the eradication of terrorism and terrorist ideologies but will also serve the national interests of the two countries. While the state to state relations between Pakistan and the United States are at their best, I am of the view that business to business contacts have not as yet realized their full potential.

It is evidently clear that geo politics is fast yielding to geo economics and state to state relations are giving way to business to business contacts. A country’s overall success is becoming synonym to its success in trade and commerce. The commercial interests and interactions are not only dictating economic growth of nations but are also guiding inter-state relations. The deepening of trade relations is also important because of its role in economic development, poverty alleviation and reduction of extremism.

The very reason that I am among this important gathering is our belief that while the governments can only facilitate progress, it is the engine of private sector which has to lead the way to convert the dreams of economic growth into reality.

United States is the single largest trading partner and a major source of foreign investment in Pakistan. With a bilateral trade of over $ 4 billion our trade relations with the US are vitally important for our national and economic security.

In terms of Agreements, arrangements and understandings to facilitate trade and investment, the two governments are currently negotiating the Bilateral Investment Treaty, which in essence also marks the beginning of FTA negotiations. The two countries have already concluded an agreement for avoidance of double taxation

I would also like to talk about the economic turnaround in Pakistan and the excellent business and investment opportunities that it offers.

In order to completely transform the country into a vibrant economy and a just and fair society the Government has embarked upon an ambitious program to introduce reforms in all the key areas of politics, administration, judiciary, accountability and decentralization.

As a result of these reforms, Pakistan’s economy has made remarkable progress over the last five years. The economy is now more stable, economic policies are transparent and consistent. Wide ranging structural reforms, prudent macroeconomic policies, financial discipline and a consistency and continuity in policies have transformed Pakistan into a stable and resurgent economy. A broad base economic recovery has brought in significant improvement in all the major economic indicators. The country is well set to achieve an economic growth rate of 8% per annum over the next few years.

Pakistan has successfully completed the IMF’s Poverty Reduction and Growth Facility program and said goodbye to the Fund. To achieve financial independence and to gain more fiscal space Pakistan has successfully launched sovereign bonds in quick succession. These issues have also testified our credit worthiness as a sovereign borrower.

The negative perceptions about unfavourable conditions in Pakistan have been removed with increasing flow of Foreign Investment both portfolio investment and FDI.

Another manifestation of investor confidence in Pakistani economy is the robust performance of our stock markets. Karachi Stock Market has counted as one of the best performing stock exchanges of the world. It has recorded a remarkable 397% increase during the last five years.

We believe that trade is the real engine of growth. All our efforts are, therefore, aimed at enhancing our international trade. We have so far been successful in our efforts to increase our exports by around 20% during the last two years. Our vision is to double our exports within the next five years.

Pakistan has one of the most healthy and vibrant financial sectors in the region. Our banking system is internationally competitive and other financial institutions are fully in line with the international best practices.

The infrastructure development, especially expansion and improvement of roads is one of the top priorities of the Government. The telecommunication sector in Pakistan is one of the most rapidly growing not only in the region but in the world.

Our privatization program is driven by our belief in free-markets. What we are doing is re-orienting the role of state through privatization. The role of state, as we see it, is of a policy maker and a regulator. We are successfully pulling the government out of production so that it can better focus on its core responsibilities of law and order, macroeconomic stability, infrastructure and social sector development.

The strategic location of Pakistan and its close proximity to the Central Asia, the Middle East and China offer a tempting attraction for the foreign entrepreneurs. Our biggest asset is the human capital, which is vibrant, vigorous and industrious.

Our investment policy is liberal and business friendly as it has been designed in consultation with businessmen, investors and representative forums as well as the multinational corporations. It provides equal investment opportunities for both domestic and foreign investors. There is no restriction on the extent of foreign equity. The average tariffs and taxes in Pakistan are one of the lowest in the region. The foreign investment is fully protected through the Foreign Private Investment Act (1976), Protection of Economic Reforms Act (1992) and Foreign Currency Accounts (protection) Ordinance (2001).

We are fully cognizant that no country can insulate its business and investment climate from the overall political and security environment, no matter how elaborate legislative reforms and the constitutional guarantees are provided to facilitate business and protect investment. The political stability and internal as well as external security of a country has a direct bearing on its investment climate.

As far as the internal security is concerned, the situation in Pakistan is far better than most of the countries in the region and in the world where investment has been flowing in uninterrupted. Democracy is taking roots in Pakistan, Parliament is functioning freely and censorship is a word of the past for both the print and electronic media. Everyone enjoys the freedom of speech and a new culture of tolerance is visible in the socio- political life in Pakistan.

We have suffered a lot form the long period of war and instability in Afghanistan. Coming from the corporate world it would not be difficult for you to imagine the kind of impression does the war going on next door leave on the mind of an investor. Pakistan considers peace and stability in Afghanistan as crucial to the benefit of both countries in the context of economic growth, development of the region and expansion of trade linkages with Central Asia.

Fortunately the things are getting better as there has been a transition from war to reconstruction in Afghanistan. The successfully completed first ever presidential elections and the long term US commitment have given democracy an extremely bright chance to flourish.

Our relations with India are getting better. The ongoing dialogue is a manifestation of our mutual desire for peace and stability in the region, which is an absolute essential for economic growth and better living conditions for the people. The continuation of composite dialogue despite some setbacks is a reflection of the two countries’ preference for peace over war, friendship over animosity and trust over decades of mistrust and suspicion.

A large number of multinational corporations are already doing business in Pakistan in almost all sectors of the economy including banking, finance, telecommunications, pharmaceuticals, automobiles, oil and gas, power generation, aviation and construction. We are open and competitive. Our trade regime is one of the most liberal in the world.

While all sectors of the economy are open for FDI, I would specifically mention textiles, telecommunications, housing, construction, power generation, infrastructure development, mining and food processing as priority areas for foreign investment.

The abolition of textile quota has offered enormous opportunities to the textile sector in Pakistan which is also the main stay of our economy, contributing over 60% towards our total exports. The textile sector in Pakistan is both horizontally and vertically integrated to make it one of the most competitive in the world along with China and India. The American companies can form very enterprising partnerships with this vibrant sector in Pakistan.

Keeping in view the growing energy requirements to fuel the growing economy, the government has announced special concessions for investment in the energy sector including electricity generation and transmission and oil and gas exploration and marketing.

The telecommunications sector in Pakistan is one of the fastest growing sectors in the world. As many as seven wireless telecommunications companies are operating very successfully in Pakistan.

Our mining sector also has a very vast potential. The incentives to encourage investment in the mining sector include minimum custom duties on import of machinery and equipment, no provincial or local taxes except royalty and no sales tax on export of minerals.

The supply and demand sector strongly weighs in favour of investment in the construction industry in Pakistan. A number of international companies have already invested in the housing and real estate in Pakistan.

We fully share corporate world’s concerns about protection of intellectual property rights and the Government has taken a number of steps to ensure complete protection of intellectual property rights. The most important of these steps is the creation of Intellectual Property Rights Organization (PIPRO).

Before concluding my talk I would also like to share with you my views on the misperceptions about Pakistan. I hope this will correct some of these discernments and present a true perspective about this country. Unfortunately, many people associate Pakistan with radicalism, terrorism, drugs, political instability, cultural and social backwardness, rampant poverty and illiteracy. The truth on the contrary is that an overwhelming majority of Pakistanis comprise moderate Muslims, who seek to balance the demands of modernity with their rich spiritual and cultural heritage. They are liberal in their thinking and moderate in their beliefs and are keen to interact with the outside world. The immediate joining of the international coalition against terrorism was a result of our strong commitment to peace and security and our rejection of terrorism and terrorist ideologies.

The potential that Pakistan has is far more promising than what it has already achieved. I invite you all to explore the excellent opportunities offered by Pakistan to foreign investors. Our businessmen are keen to interact with the international business community to develop mutually beneficial partnerships. We regard our partners in trade as our partners in development. I urge you to join us in our development efforts.

I assure you of my government’s full support to protect foreign investment and business interests in Pakistan.

I thank you all for affording me this opportunity to share my thoughts with you.