Sindh in China shop

Law and order and governance issues proving stumbling blocks in Sindh government’s bid to woo Chinese investors

Sindh in China shop

Recently a high-powered delegation of the Sindh government, led by the head of ruling Pakistan People’s Party’s Bilawal Bhutto Zardari and his father Asif Ali Zardari along with Chief Minister Syed Qaim Ali Shah, visited China to woo investment in the province. On the return, officials expressed confidence that during their visit between August 26-31, 2014, they received substantial commitments for investment worth billions of dollars from the Chinese investors and investment companies in infrastructure and energy sectors in the province.

After the 18th Amendment in the Constitution, the provincial governments are now independently negotiating foreign investments in the provinces. Punjab took the lead in the past and has attracted foreign investment in energy and transport sectors from Turkey, China, South Africa and other countries.

Last year as well, the Sindh chief minister, along with his government’s machinery, had visited the neighbouring China and had signed multiple Memorandums of Understanding (MoU) with the Chinese firms for generating more than 6,000 megawatts of electricity from coal and wind. Besides other sectors, Sindh has a unique advantage to offer investment opportunities for development of mines for huge coal reserves and power generation from coal.

Currently, Pakistan’s generation from coal is almost nil, where as many countries with less coal reserves produce huge electricity. Although there is need to address environmental concerns because of power generation from coal, Pakistan is mainly focusing on producing power from this abundant natural resource. Otherwise, power generation from imported furnace or diesel oil is quite expensive, whereas gas reservoirs are depleting due to huge industrial, domestic and transport consumption.

According to official estimates, over 175 billion tons of lignite coal is deposited in the vast fields of Tharparkar district, which can hold a potential of generating over 100,000 megawatts of energy for the next 300 years. Similarly, the 180-km long belt of the coast offers huge opportunities for investment to generate wind and solar power.

The recent visit of the Sindh government delegation to China had much importance because the PPP’s top leadership, along with high officials of Sindh Investment Board and Sindh Bank, were also present to muster assurance to the Chinese investment companies and individual investors about the seriousness and commitment of the provincial government to provide guarantee for secure investment in Sindh.

Pakistan’s generation from coal is almost nil, whereas many countries with less coal reserves produce huge electricity.

The investors were told that in Pakistan for projects worth $90 million, foreign investors would not need any sovereign guarantee, however, for the projects having costs higher than that amount they should be given sovereign guarantees by the Pakistan government. Chinese banks are reluctant to provide finances without such guarantees.

They were told that Sindh Bank has deposits worth $1 billion, with which it will provide sovereign guarantee to Chinese investors. Bilawal apprised the investors that the Sindh government has approved a set of legislation, including Public-Private Partnership Act, to provide security and assurances to foreign investors. The government appreciates Chinese investment and for this purpose a separate China desk has been established at Sindh Board of Investment to facilitate Chinese investors in Sindh and also to provide one-window facility.

According to official sources, the provincial government’s delegation has sought commitments from Chinese investors in the form of a number of MoUs to initiate Mass Transit Programme in Karachi and other parts of the province, besides investment commitments for energy, roads, flyovers and other infrastructure development projects as well as development schemes for conservation of Indus river water and other natural water resources.

The Sindh government’s delegation also organised two separate Investment Conferences at Beijing and Shanghai, which were largely attended by noted Chinese investment companies, groups and government officials.

"The Sindh government signed several MoUs worth about 9 to 11 billion dollars during the visit," said Abrar Ahmed Shaikh, Coordinator China Desk at Sindh Board of Investment.

Giving details of total nine MoUs signed for the proposed projects in Sindh, he said Chinese investment is sought in development and implementation of Karachi Transportation Improvement Plan, Mass Rapid Transit Project, Bus Rapid Transit Projects, Intra-City Bus Project, revival of Karachi Circular Railway (KCR) and development of two Light Rail Track (LRT) Lines; dualisation of the Mirpurkhas to Sanghar road which is currently a two-lane single carriageway, Ghotki Kandhkot Bridge with link road, Hyderabad-Badin Road Project, dualisation of Hyderabad-Matli road, rehabilitation of Matli-Badin road, development of Badin Coal Field for Mining and setting up of a 330 MW sub-critical power project and other infrastructure facilities, allocation of 100 square km (Block-IV) in Thar Coal Field, district Tharparkar for further detailed survey and investigation/feasibility study.

Moreover, Shaikh said, a separate MoU was signed between the government of Sindh and China Institute of Water Resources and Hydropower Research to encourage the comprehensive collaboration in the area of water resources and hydropower technology and to promote friendship between the two parties for their mutual enrichment in scientific, academic, cultural as well as other areas.

Khurram Shahzad, Chief Investment Officer at Lakson Investments, is not encouraged to see signing of a multiple number of MoUs by the Sindh government, as he sees a lot of governance problems in the Sindh government, which may hinder foreign investment. "Had there been some agreements on development projects, we could have seen some positive outcome of this visit, but these were just MoUs," he said.

"There are a lot of procedural issues, vested interests and delays in approval with the provincial government," he pointed out. There is a lot of potential for investment in Sindh including investment in oil, gas and energy, livestock, power generation and infrastructure development like rail, roads and bridges, but there is a lack of seriousness at the government side. "The government is even unable to spend its annual budgeted amount, how would they utilise huge foreign investment," he asked.

There is great potential of Public-Private Partnership and steps be taken in this direction. The main concern for the investors is security, which is quite problematic in Karachi. For the last about one year, the Rangers and police have been carrying out targeted operations in Karachi, the largest city of the country as well as commercial hub, to nab criminals, but still target killings, kidnapping for ransom and street crimes are happening regularly. The law and order situation in other parts of the province is also not conducive to attract investment.

Even though the top leadership of the provincial government has shown a political will and commitment to facilitate foreign investors in Sindh, there is a lot to do to bring foreign capital in Sindh.