CSF has developed an Action Plan through consultations with international and domestic experts for the implementation of a Ministry of Finance backed Pakistan Industrial Venture Fund I (the “Fund”) to be undertaken in cooperation with United States Agency for International Development (USAID) and in partnership with multilateral donor organizations.

Pakistan could benefit from private equity participation in the economy in many ways.  Mainly, private equity funding could help to unlock latent opportunity for enterprises and entrepreneurs who have the potential for expanding and innovating and in the process create jobs, economic growth, and capacity building.  Secondly, the creation of a private equity industry would incentivize more innovation, improve corporate governance, bring foreign investment dollars, and expand the financial markets.

Pakistan currently has a lack of private equity venture capital financing.  Private equity has played a key role in leading growth and innovation in the global economy in the last 50 years.  Private equity’s track record for spurring economic growth is well documented.  In the US, venture capital backed firms were directly responsible for 9.1% of total private sector employment and 17.6% of GDP in 2006.  For job growth, the IFC found that companies backed by its funds had averaged job growth of 22.3% per year compared to 2-3% average for the economy as a whole.  In Britain, statistics show that private equity backed companies grew jobs at 9% compared to 1% for companies in the FTSE 100 index.  In the developing world, a study in India showed that private equity backed companies grew markedly faster in revenues, wages, and exports than non-private equity backed counterparts.

The Pakistan Industrial Venture Fund I is proposed as a MoF backed, professionally managed private equity fund to invest in high growth enterprises where the success of the investments will create economic growth and spur innovation while delivering financial returns to the investors.  The Fund will be sized between US $150-250 million.  Private funding sources will be sought, but support and financing is also required from public sector aid and multilateral agencies including USAID, ADB, and IFC.

The proposed Fund is designed to tailor lessons from best practices in private equity to the environment in Pakistan.  It is proposed to have the following key features:

• Set up with a focus on legal and corporate governance structure in-line with international industry standards.
• Professionally managed by an internationally experienced fund manager.
• Focus on providing growth capital for industrial sectors where Pakistan has comparative advantage.
• Involve the active participation of experienced public sector private equity investors including the ADB and IFC.

For the implementation of the Fund, the Action Plan prescribes a series of steps for establishing the fund with the main objective of selecting the best qualified fund manager to implement the project and to have agreements in place that align the interests of the fund manager and investors while delivering the intended results.  Once a fund manager is selected, they will be in charge of establishing and operating the Fund.  CSF will coordinate the implementation of the step plan with the assistance of a team of advisors and experts.

 CSF has received Letter of Commitment for the Industrial Venture Fund from Government of Pakistan.