Signing of the Memorandum of Understanding between BOI and CSF

Talking Points of Mr. Omar Ayub Khan, Minister of State for Finance and Chairman CSF
Event: MOU Signing between Board of Investment and Competitiveness Support Fund
Date:                      16 August 2007
"INNOVATIVE PARTNERSHIPS FOR ECONOMIC GROWTH"

MOU between BOI and CSF

Honorable Minister Zahid Hamid, Ms. Amy Holman, Mr. Mushtaq Malik, Mr. Arthur Bayhan, Your Excellencies, Ladies and Gentlemen,

• The Competitiveness Support Fund is established and started with its operations on May 15, 2006 by organizing jointly with the Competitiveness Institute (TCI) based in Barcelona, Spain the first ever Regional Conference on Competitiveness and Economic Growth in Islamabad.

• The release of the first ever State of Pakistan’s Competitiveness Report in march this year by the Prime Minister prepared by Competitiveness Support Fund has demonstrated the Government’s efforts to improve Pakistan’s competitiveness rankings. The ranking of Pakistan has been improved from 94 to 91 in Global Competitiveness Index (GCI) and from 61 to 60 in Business Competitiveness Index in 2006.

• The specific improvements were on macro- economic environment, the confidence in government integrity financial sector reforms and more other areas.         

• The establishment of the CSF has reflected to the fact that the Government of Pakistan has recognized Competitiveness as the cornerstone of its growth strategy. Therefore, Government has included competitiveness for the first time in its Poverty Reduction Strategy Paper for the next five years.

• CSF has been successful in establishing partnerships with some of the important competitiveness agencies and economic development organizations in- and outside of Pakistan. The partnership agreement of the CSF with the World Economic Forum is an excellent example.

• A key obstacle to innovation and knowledge-based growth in Pakistan is the lack of strong partnerships between local industry, the academic community and Government. To remedy this problem, one of CSF’s main objectives has been to develop and formalize such relationships. CSF’s cooperation with the Higher Education Commission (HEC) and with the Chambers of Commerce and Industries as well as cooperation with the Pakistan Business Council are excellent examples.

• Furthermore, CSF has succeeded to get the media to be part of the triple helix by the notion that “Innovation drives journalism and journalism drives innovation” In this context. CSF is sending the journalists to the relevant conferences and to the Innovation Fellowship Programme at the Stanford University.

• CSF activities on identifying the sectors that have potential and competitive advantage to grow have identified tremendous potential for Pakistan’s economic growth, such as:

• The market for motorcycle Industry will increase from existing 750,000 units p.a. to 1.7 million units by 2010-11 and 100,000 units are expected to be exported annually.  This will create additional 550,000 jobs by 2010-11 due to increase in the market size and approximately an additional Rs. 40 billion will be generated as government revenue.

• The study that CSF has done also identifies the problematic areas in the Fisheries sector in Pakistan, the result of the study gives a strategy to an Annual increase in value of catch of US$ 35 million – resulting from improved quality and better market prices, also reduction of trash fish used for animal feed at loss-making prices. It will also restore loss of US$ 60 million (30% of value of exports) exports to Europe annually by restoring EU listings for fish processors.

• CSF is assisting the Government of Pakistan in establishing the Special Economic Zones, which will result in strengthen the manufacturing industry to grow in Pakistan. In turn it will generate investment and create jobs.

• CSF’s recent work on the assessment into the Economic Empowerment of Women in Pakistan and its Linkages with Competitiveness and Economic Growth has been one of the most important studies in this sector, which addresses the economic empowerment issues for the Gender sector. It will provide a road map for the GOP for its efforts in developing future programs.

• The Action Plan proposed a Task Force to look into the supply chain of the Horticulture sector. The CSF work has identified the duplication of work that the various institutions were carrying out. It has also set Pakistan’s benchmark for the Horticulture sector to increase the current export in the sector from US$ 150 million to US$ 1 billion by 2012.

• CSF is co-financing innovative projects; CSF’s investment is expected to create a multiplier effect, where every $1 of investment is expected to generate new investment 8 times higher in the country. All approved projects will support private-public partnerships to link research and development institutions and private sector by involving a three-fold set of stakeholders, termed ‘Triple Helix’ by the economic leaders, which includes, private sector, academia, and government.

• The CSF’s matching grants projects will generate a fresh investment of Rs. 342 Million with an additional 5000 jobs.   

• I hope this partnership with the Board of Investment will help the government of Pakistan to establish a more business friendly environment and generate more investment into country.

Remarks of Amy Holman, Economic and Commercial Councilor, US Embassy, Islamabad, Pakistan
Event:                     MOU Signing between Board of Investment and Competitiveness Support Fund
Date:                      16 August 2007
"INNOVATIVE PARTNERSHIPS FOR ECONOMIC GROWTH"

MOU between BOI and CSF

Honorable Minister Zahid Hamid,

Minister Omar Ayub Khan,

Secretary Mushtaque Malik,

Ladies and Gentlemen,

Good Morning.

It is an honor to be here today to witness the signing of the Memorandum of Understanding between the Board of Investment and the Competitiveness Support Fund. 

The United States is proud to continue working with the Government of Pakistan in improving the income, jobs and well being of its citizens. We understand that providing economic opportunities for all Pakistanis is fundamental in building a solid, sustainable foundation for continued economic growth and peace.

For the period 2003 through 2007, USAID’s funding for Economic Growth initiatives will exceed $73 million. Out of that, today’s agreement reaffirms our commitment of $12 million to continue generating economic success and reducing poverty in Pakistan. 

Competitiveness is the key to long-term economic growth. We are pleased to see that the Government of Pakistan’s policies of de-regulation, liberalization and privatization are working and providing concrete results.

Certainly, as information is shared, our two countries can learn, not just from each other, but from all stakeholders of this project.

The benefits to Pakistan are evident. As its companies strengthen their competitive position, the country’s economy will grow and improve the economic condition of its citizens.

As a driver of global economic growth, the U.S. also benefits from competitiveness. A competitive and prosperous Pakistan will create more trading opportunities for the U.S., as well as other countries in the region.

As we have heard, the Competitiveness Support Fund is a joint initiative of USAID/Pakistan and the Ministry of Finance. We are here today to amplify that partnership by launching a new collaboration between the Board of Investment and CSF.

This partnership will ensure that Pakistan is better poised to not only understand the needs of the global market, but also meet them head-on with a highly skilled and well-trained workforce.

CSF continues to build on the momentum generated from the conference it held here in May last year on competitiveness and economic growth in the Asia-Pacific region. The conference provided Pakistan an excellent opportunity to showcase its competitiveness initiatives and efforts underway to improve its standing in the global value chain.

CSF has identified industry sectors – such as motorcycles and fisheries -- with potential and competitive advantage. The motorcycle industry, for instance, will increase the motorcycle market from existing 750,000 units per annum to 1.7 million units by 2010-11. This will create additional 500,000 jobs by 2010-11 due to increase in the market size and approximately an additional Rs. 40 billion will be generated as government revenue.

CSF has also carried out a study, which is assisting the Government of Pakistan in establishing Special Economic Zones (SEZs), which will result in the formation of a Task Force on SEZs. This Task Force will identify the investor’s demand and assess the economic impact of SEZs. It will also define the incentives and the standards for SEZs, which will generate investment and create jobs.

In a short span of time, CSF has managed to establish public-private partnership to promote innovation and competitiveness by working closely with the Higher Education Commission, Pakistan Agriculture Research Council, the provincial governments and now with the Board of Investment.

Investment is one of the important pillars on which competitiveness is based and measured. Foreign and domestic investment generates employment, creates new managerial skills and distribution networks that produce new technology and enhanced capital for the manufacturing industry to grow.

The Memorandum of Understanding that we are about to sign today between the Board of Investment and CSF is a noteworthy step towards these objectives. I hope this agreement will help the Government of Pakistan to generate more investment and its related activities in the country.

I wish this partnership every success. 

Thank You.

Speech by:           Mr. Zahid Hamid, Minister for Privatisation and Investment, Government of Pakistan
Event:                     MOU Signing between Board of Investment and Competitiveness Support Fund
Date:                      16 August 2007
"INNOVATIVE PARTNERSHIPS FOR ECONOMIC GROWTH"

MOU between BOI and CSF

Minister of State for Finance and Chairman CSF, Mr. Omar Ayub Khan, Excellencies, Economic Councilor, Amy Holman, Secretary BOI, Mr. Mushtaq Malik and CEO Mr. Arthur Bayhan.

It is a great pleasure to be here today at this impressive ceremony marking the signing of an MOU between the BOI and the Competitiveness Support Fund. The MOU, which provides for mutual cooperation for improving the investment climate and enhancing competitiveness of Pakistan's economy, also includes preparation of a Strategy Paper outlining the requisite structured reform process, creation of a Foreign Investors Council for policy dialogue between the government and foreign investors, implementation of the Fund's Action Plans for establishment of Special Economic Zones and enhancement of finance and competitiveness in the horticulture sector and organization of a conference on trade and investment in the Federally Administered Tribal Areas .

The MOU is another significant step in the second generation reforms presently being implemented by the government pursuant to the multidimensional and broad based first generation reforms which were introduced in Pakistan soon after President General Pervez Musharraf took charge of the country and appointed now Prime Minister Mr. Shaukat Aziz as Finance Minister. In the economic sector, reforms have been based on the three pillars of privatisation, deregulation and liberalization, accompanied by transparency, good governance and continuity and consistency of policies. These reforms have taken place in virtually every field, including industry, agriculture, finance, capital markets and tax administration. The reforms are acknowledged to have been very successful and regarded as role models for the entire region.
Second generation reforms initiated by the government include strengthening of institutions such as the judiciary, civil service and police and tax administration, improving competitiveness of industry and infrastructure, building a robust financial system and continuing capital market reforms.

Ladies and Gentlemen:
Pakistan's privatisation programme is recognized to be one of the most successful in the region. In the 16-year period from 1991 (when the Privatisation Commission was established) till today, 165 privatisation transactions have been completed for a total amount of US$ 8.6 billion! The privatisation programme has gained significant momentum under the present government. 78% of the amount, or $ 6.7 billion, was raised from 1999 to date. According to the World Bank Privatisation Database, by the year 2005 Pakistan was amongst the top 10 developing countries in terms of value of completed privatisation transactions.
The last financial year, 2006-07, has been a record year in terms of privatisation proceeds. A total amount of more than US$ 2 billion was raised from 9 transactions during the year. Last month we completed the United Bank Limited (UBL) Global Depository Receipt (GDR) transaction raising $650 million at Rs. 195 per share, which was the highest valuation ever achieved for an Asian Bank GDR. Only a few days ago, we completed the highly successful Habib Bank Limited (HBL) Initial Public Offering (IPO), for which more than 436,000 applications were received for a total amount of Rs. 19 billion, representing over subscription of 2.33 times.
On the investment side also, new records were set during the year 2006-07.
Total foreign investment was an astounding US$ 8.4 billion, including Foreign Direct Investment (FDI) of US$ 5.1 billion and portfolio investment of US$ 3.3 billion. Total foreign investment has increased by 87% over the last year, and is now an impressive 5.8% of GDP!
These figures reflect acknowledgement and appreciation on the part of foreign investors of Pakistan's remarkable economic performance in recent years as a consequence of successful economic reforms, their confidence in the country's pragmatic policies and leadership and their desire to avail the exciting investment opportunities that are available in Pakistan today.
Pakistan today has a robust, vibrant economy with one of the highest growth rates in Asia.

1. GDP growth has averaged more than 7.5% p.a. during the last 4, years
2. Per capita income in dollars has increased by an average 13% per annum over this period to US$ 925 in 2006-07.
3. Overall investment has increased by more than 6% of GDP from 16.8% of GDP in 2002 to 23% of GDP in 2007.
4. Poverty has declined from 34.5% in 2000-01 to 23.9% in 2004-05, which means that 13 million people have come out of poverty in this period.
5. Public debt as % of GDP has fallen from over 100% of GDP in 1999 to 53.4% in 2007.
6. Remittances from Pakistanis living abroad have reached US$ 5.5 billion this year, an all-time high!
7. Foreign Exchange reserves have surged to over US$ .15 billion by end June, which again is the highest-ever level.

In the next few months we expect to complete a number of important transactions, including GDRs of NBP, KAPCO and HBL, IPO of PSMC and SLIC and strategic sales of PSO, Jamshoro Power Company, SME Bank and HEC.
Despite these impressive achievements, we have still a long way to go to improve competitiveness of our industry, which is essential if we are to ensure that Pakistan benefits from the new economic conditions brought about by globalization, the chief driving force of the world economy. Concerted efforts are required at the federal, provincial and local levels in various sectors of the economy in order to improve Pakistan's rankings in the Global Competitiveness Index (presently 91) and Business Competitiveness Index (presently 67).
I am confident that implementation of the measures envisaged in the MOU will make a significant contribution towards achieving the objective of increased competitiveness. I wish both BOI and CSF every success in their efforts.
Thank you.