Nikkei Asian Review January 15, 2015 Ishaq Dar interview Finance minister wants investors to bet on Pakistan -- and feel safe doing so TOKYO -- Pakistans government has its hands full. The cabinet of Prime Minister Nawaz Sharif, formed in June 2013, is simultaneously attempting to spark economic growth, privatize state-owned companies, resolve energy shortages and deal with extremists within and around the nations borders. As Finance Minister Ishaq Dar made clear in two wide-ranging conversations with The Nikkei, these efforts are designed to send a message to the international community: Pakistan is open for business. Ishaq Dar, Pakistans finance minister, speaks during an interview in Tokyo on Jan. 13. Close Ishaq Dar, Pakistans finance minister, speaks during an interview in Tokyo on Jan. 13. But after a year and a half in power, how is the government faring? Dar, while conceding that infrastructure development and terrorism pose major challenges, stressed that the prospects for investment in Pakistan are bright. Q: What are your economic growth projections? A: The economic position of Pakistan was fairly unstable [prior to the 2013 general election]. Thats why many international institutions stopped working with Pakistan. But the political party headed by Prime Minister Nawaz Sharif -- the Pakistan Muslim League -- had a very clear road map of how to make an economic recovery. That was included in our manifesto. We had four Es: economy, energy, extremism, education and health. Our fiscal year starts July 1. Soon after we took the oath [of office] in June 2013, we [pursued] very strong structural reforms to fix the economy. Theyre always painful, but Im glad to share with you that ... all of our macroeconomic indicators have shown very good performance. We had almost an average [gross domestic product growth rate] of 3% in the [previous] five years. But we pushed for over 4% in our very first year. [We resolved] to make a full attempt to have GDP growth of 4%, and the next year 5%, the third year 6% and the fourth year 7%. So our projected GDP growth is 7% in the 2017 to 2018 fiscal year. Q: Pakistan last year made a splash in the bond market. A: We took the country back to the international bond market after seven years. We issued in April a conventional bond, a euro-dollar bond. It was heavily oversubscribed. We offered it for $500 million, and we got $7 billion [worth of orders]. By the way, we did not take $7 billion, we took only $2 billion. For sukuk -- Islamic bonds -- in November we went again to the international market and offered $500 million. We were offered $2.3 billion and we picked $1 billion. Q: You are moving to unload stakes in state-owned companies. Do you have any fund-procurement targets tied to the share sales? A: I can tell you the number of the state-owned enterprises [involved]: 31. There are three types of privatization taking place. One is pure privatization. We will be trying to sell electricity distribution companies. The second is what we call strategic partnerships. We want to keep 74% [stakes]. If somebody comes and says, No, we want 51%, we can talk. Because theyre so huge: Pakistan International Airlines, Pakistan Steel Mills. With these types of entities we want strategic partners to come and work with us. We will give them the management, and they will improve efficiency. The third is divestment of shares. For example, we had a certain amount of shares left in United Bank Limited, and we sold them all. UBL now is 100% private. There are three categories, so its difficult to give you a figure. It depends. Q: You are reportedly keen to introduce Japanese technology for coal-fired power plants, for example from Mitsubishi Corp. What are the prospects for doing so? A: Unfortunately, in the last two decades, we have [relied on] power generation based on furnace oil or diesel. They have been very expensive. Our coal-based production is less than 2%. We have plans for something like a 10,000-megawatt addition in the electricity generation sector, because the supply-demand gap right now is around 4,000MW to 5,000MW. China has indicated that they are willing to finance coal-based generation. If Japanese companies would like to come, they are most welcome. Q: You met with officials from Mitsubishi in December. What did you discuss? A: I had a very useful meeting with a four-member delegation from Mitsubishi that was led by their chief executive in Pakistan, Kimihide Ando. Specifically, we discussed matters pertaining to possible export of [liquefied natural gas] by Mitsubishis subsidiary, Diamond Gas International, to Pakistan, [along with] overall enhancement of Mitsubishi investment. Q: When Japanese and other international companies consider investing in Pakistan, security tops the list of concerns. How do you intend to reassure them, especially after the horrific Peshawar school attack in December? A: We have never compromised on our defense budget. This has always taken a top priority. Thats No. 1. No. 2, our party, under the leadership of Prime Minister Sharif, made a very clear public commitment that we will deal with security. Primarily, the security issue is related to extremism. Post-9/11, I think many of the [militants] found an easy location at the borders of Afghanistan and Pakistan. Immediately after we took the oath, we called all parties to a conference. This is something our party believes should [involve the] participation of all political parties, whether they are in government or not. Its a national issue; it must be handled collectively. Im talking September 2013: A few parties suggested that we should give dialogue a last chance in the peace process. Our government agreed, we went ahead with the peace process dialogue, but it did not succeed. [After that], those parties -- for example, the political party of [key opposition leader] Imran Khan -- had no option but to agree with the government that we had to [take action] against the terrorists. We gave the go-ahead to the armed forces to launch the operation we call Zarb-e-Azb. That operation is very successful, and its still on. It has eliminated the sanctuaries of the terrorists, it has destroyed their ammunition, it has killed almost 1,200 [militants, including] their high-profile leaders. The [attack] in Peshawar was a reaction. When you undertake any such operation, you expect a blowback. We expected a bigger blowback. But they are so weakened that these cowards chose to attack innocent children. Q: As a minister from a major Islamic country, what is your reaction to the recent terrorist attacks in Paris? A: The terrorists do not have religion. They neither have religion nor nationality. Islam is a peace-loving religion. Our holy book says that the killing of one human being is [akin to] killing all of humanity. ... It doesnt say killing of a Muslim, it doesnt say Christian or Buddhist or Jew -- any person. Q: You recently signed the accord for the China-backed Asian Infrastructure Investment Bank. How do you envision the relationship between the AIIB and Pakistan? A: This region, in totality -- meaning all of South Asia, Central Asia -- is getting 30% of the worlds infrastructure development financing. It needs 70% if we are to bring it to par with other countries in Europe, China, Japan. This bank would meet the shortfall, or the extra demand, for infrastructure financing in the entire region. It will not compete: It will supplement the Asian Development Banks efforts, it will supplement the Islamic Development Bank effort, and it will supplement the World Bank and IMF efforts. Q: China and Pakistan are also planning an economic corridor project, estimated to cost $45 billion. What are your hopes for this endeavor? A: Our governments preference is that as much of this package [as possible should] go into the private sector. For any infrastructure, energy and communication projects where there is no appetite in the private sector, the government of Pakistan will step in. The economic corridor is not going to benefit China and Pakistan alone. Its going to [bring] benefits to the entire region -- to the Central Asian states, to India, to Afghanistan, to other neighboring countries. Even Japan wont have to go to the Gulf to get things done if this economic corridor from Kashgar [in northwestern China] to Gwadar [in southwestern Pakistan] is activated. Its a win-win for everybody. We are quite grateful for Chinas support, which they announced. Now we are looking to Japan for an equal package, hopefully. Japan is an old friend. In Pakistan, we mostly see Japanese cars. Honda is there, Suzuki is there, Toyota, Hino. We are looking forward to the earliest [possible] visit -- it has been almost a decade now -- by the Japanese prime minister to Pakistan. We have a history of bilateral economic and trade relations, and I think theres a great scope to expand [the ties] further.
Posted on: Thu, 15 Jan 2015 07:33:06 +0000
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