Find ways to make profitable investments

Find ways to make profitable investments

A big focus can now be seen from the actions of the current leadership, led by the Special Investment Facilitation Council (SIFC) empowered with the support of Prime Minister Shehbaz Sharif.

Reportedly, the PM was praised as a “man of action” by one of Saudi Arabia’s ministers and Finance Minister Muhammad Aurangzeb has also focused all his energy on the implementation of policy prescriptions: 1) increasing tax revenue 2) privatization of SOEs and 3) reforming the energy sector.

A big red carpet is always laid out for foreign investors. But can we do better?

Overseas Pakistanis are Pakistan’s largest dollar earning asset. Having left the country in search of greener pastures in a different country, that generation remains intertwined with the well-being of Pakistan and its people due to the inability to obtain citizenship, the lack of permanent status, the desire to support a family at home and the emotional longing to return home. several stages of later life.

Not surprisingly, remittances of $30-32 billion a year imply perhaps $60-70 billion in annual revenue of which nearly 50% is repatriated. Big money is earned by them and pulling $3-5 billion a year will not be a problem.

In their recent visit, foreign investors were offered super high project returns expected to be 14-50% per annum. Naturally, this project’s internal rate of return is expected return and is not guaranteed at all – either sovereign or otherwise.

Nevertheless, this is indeed a very attractive return and Pakistanis abroad, if offered such a project in the form of an equity instrument with a minimum investment of $1,000, would be interested.

The government of Pakistan could retain a majority stake and offer the balance as a pool of funds with an expected return on equity of 12-15% higher with an option to convert to debt at 9-10% per annum.

First, the majority of overseas Pakistanis, if offered equity in this project, would convert 60-80% of the USD profits domestically instead of repatriating them outside Pakistan.

Secondly, there will be no impact of Pakistan’s geopolitical influence because Pakistanis will invest in Pakistani projects. Third, there will be no threat of 100% profit repatriation or lack of support at the time of debt transition in the event of political disagreements.

An additional investment of $5-6 billion from overseas Pakistanis over the next 10 years will help repay foreign loans of $50-60 billion.

Fourth, any government that offers this will gain significant political mileage. Fifth, money coming out of Pakistan through Hundi in search of investment can be blocked, if equally good projects are offered to Pakistanis fleeing the country.

Finally, additional competition for the same projects offered to foreign investors through SIFC can increase bargaining power with foreign investors with competitive and crowded bidding.

Pakistan’s dollar appetite is increasing while the appetite of foreign investors is decreasing. China has invested tens of billions of dollars in a payment regime close to fixed income is struggling to recoup its payments (China’s power plant investors are constantly raising issues at every level).

Therefore, additional lending through G2G support is preferably limited to keep Pakistan solvent.

Western countries also don’t seem to be easily impressed, except for the Reko Diq project and other lucrative assets that we offer to extract raw materials from the country of origin. That is equivalent to selling raw Thar coal instead of generating electricity from it. Out-of-the-box solutions are needed to reduce dollar dependence. Otherwise, 10 years from today we will be worrying about repatriating foreign profits to equity investors just as we are now struggling to meet China’s IPP payments.