The high volatility in the currency market is not good for business. The falling rupee means a higher cost of living. Not good. Gas prices have been jacked up. Electricity is now more expensive. People want relief and relief is not in sight. There’s uncertainty and uncertainty is bad for business. Yes, financial markets are jittery.
To be certain, the government has a well-thought-out three-pronged economic strategy: export incentives, non-debt-creating foreign investments, and bringing in additional remittances through banking channels. Three things: a comprehensive economic policy is in place; implementation of the policy may have been slow; policy outcomes will take time (as they always do).
The good news is that PepsiCo Chief Executive Officer for Asia, Middle East and North Africa (AMENA) region Mike Spanos recently informed Prime Minister Imran Khan that his company will be investing $1 billion in Pakistan over the following five years (revenue: $63 billion).
The good news is that Suzuki Motor Corporation Chairman Osamu Suzuki (revenue: $27 billion) has said that his company is planning to invest $450 million by setting up another production plant in Pakistan. The Coca Cola Company (revenue: $35 billion) will be investing an additional $250 million in Pakistan. JW in collaboration with Forland has launched a $150 million project to produce cargo trucks and special purpose vehicles in Pakistan. Interestingly, this project has a significant technology transfer component built into it.
Volkswagen, the largest automaker in the world (revenue: $86 billion), has inked a deal to assemble vehicles in Pakistan (according to the German ambassador the “development shows confidence in Naya Pakistan”). Siemens, the German industrial manufacturing giant (revenue: $94 billion), has also shown interest in investing. Renault, the French automobile manufacturer (revenue: $66 billion), has also decided to enter Pakistan.
Exxon Mobil Corporation, the American multinational oil and gas giant (revenue: $237 million), is making a comeback in Pakistan after an absence of nearly three decades. LNG Market Development Chairperson Emma Cochrane said that her company plans to start Pakistan’s first offshore oil drilling about 230 kilometres from Karachi.
Pakistan currently produces around 86,000 barrels of oil per day and some four billion cubic feet of gas per day (bcfd). According to conservative estimates, we can produce over 200,000 barrels of oil per day within the next three years. Yes, Oil and Gas Development Company Limited (OGDCL) has financial as well as human resources to dig a hundred wells a year as opposed to a dozen wells a year.
Intriguingly, over the past five years, no new major exploration blocks have been auctioned off (the focus remained on the importation of LNG). For the record, the last bidding round was held in March 2013. The PTI government has already identified 40 new blocks, of which 10 have been auctioned for exploration.
The other good news is that cement dispatches hit 4.5 million tonnes for October 2018, up 7.4 percent year-over-year. For the four months of Fiscal Year 2018, cement dispatches hit 15.3 million tonnes, up 5.3 percent year-over-year. Surprisingly, overseas Pakistani workers sent home $2 billion in October 2018 as compared to $1.65 billion in October 2017, up 21 percent.
In January 2019, Interloop Ltd, a Faisalabad-based textile firm that supplies socks to Nike and Adidas, is planning the largest-ever initial public offering (IPO) to raise Rs6.8 billion.
Yes, the bond of trust between the government and the business community needs to be solidified. Yes, the volatility in the currency market must be brought down. Yes, a lot more needs to be done.
The writer is the government’s spokesperson on economy and energy issues.
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