Pakistan: land teeming with investment potential

Shalimar Gardens, in Lahore, Pakistan, was built by the Mughal emperor Shah Jahan in 1692. / Courtesy of the Pakistani Embassy

Located in the heart of Asia, Pakistan is the gateway to the financially liquid Gulf States and the economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities, but there are many more reasons.

A large part of the workforce is proficient in English, hardworking and intelligent. Pakistan possesses a large pool of trained and experienced engineers, bankers, lawyers and other professionals with many having substantial international experience and who are available on cost effective terms.

Current investment policies have been tailor-made to suit investor needs. Pakistan’s policy trends have been consistent, with liberalization, de-regulation, privatization and facilitation being its foremost cornerstones.

The capital markets are being modernized, and reforms have resulted in the development of an improved infrastructure in the stock exchanges of the country. The Securities and Exchange Commission of Pakistan has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector. Whilst the federal Board of Revenue has facilitated structural reform in tax and tariffs, the State Bank of Pakistan has invigorated the banking sector into seeking high returns on investment.

Pakistan’s coal resource potential is estimated to be around 186 billion tons. Of these resources about 175 billion tons are located in Sindh Province at Thar, one of the single largest coal deposits in the world.

Thar coal resources have an estimated potential of generating 100,000 megawatts of electricity over a period of more than 100 years. Thus, this resource provides a wonderful opportunity for large scale mining and power generation over long period of time. Besides, Thar coal fields are located 296 km from Karachi port in the south eastern arid zone region of Pakistan which is one of the most peaceful and harmonious area of the country.

To address the persistent energy gap, the large indigenous coal (lignite) resources at Thar form an integral part of Pakistan’s long term energy security strategy.

The Thar resource has a very good potential ― depending on the scale of mining operations to be an economic option compared to other energy-sources. Development of Thar is envisioned to emerge through a partnership of the government and private sector, wherein the private sector would assume investment risk subject to viable commercial market conditions and the government would provide an enabling environment and the stability necessary to facilitate such investments.

Thar lignite having a stripping ratio of 6:1 and a heating value of 6,200-11,000 Btu/lb is better than many lignite resources where successful mining and power generation is occurring

The Thar Coalfield has been declared as a Special Economic Zone, and the projects for the development of Thar (also including coal mining and power generation) declared as “Projects of National Security.”

Some 20 percent IRR is given to firms which achieve Financial Closure before Dec. 31, 2015 for mine and power plants based on indigenous coal and an additional half a percentage IRR. For example, 20.5 percent IRR for firms which financial close by or before Dec. 31, 2014.

There are a number of advantages. Zero customs duties are imposed on the import of coal mining equipment and machinery including vehicles. There is an exemption on withholding tax to shareholders on dividends for an initial 30 years. There is an exemption on withholding tax on the procurement of goods and services during project construction and operation. Lastly, there is an exemption for 30 years on other levies including special excise duty, federal excise duty, WPPF and WWF.

There are many potential investment options in Thar, including coal mining where investors interested only in mining may apply for a mine lease; an integrated coal and power generation project for which investors may also opt for investing in an integrated coal mining and power generation project; mine mouth power project, where the Thar coalfields present the best opportunity for mine mouth power projects in view of the great demand for energy in the country.

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