Nope, no overseas investment either | Pakistan Today

Nope, no overseas investment either

With decrease of 46.6 percent and continuous downward trend of Foreign Direct Investment, the Pakistani economy would have seen further pressure if local business houses had not shown interest in acquiring the assets and operations left by foreign investors, experts said while commenting on interest shown by local banks in HSBC operations. According to experts, the country has witnessed 46.6 percent decrease in FDI including Privatization proceeds in 2011-2012 (Jul-Feb) as compared to 2010-2011 (Jul-Feb) and it is indeed a good omen for the economy that local business groups are showing interest in buying assets left by some foreign groups.
They said that the investment inflow in various parts of the world is declining and the multinational businesses are shrinking operations due to various reasons. For example, Chevron which is world’s largest Oil Company, has decided to exit its retails oil business from Australia, Egypt, India and Pakistan due to prevailing business conditions & prospects in these countries. In India, one of the Europe’s largest banks Society General withdrew a life insurance joint venture with NBFCs in the country & is now focusing on cutting back its private banking operations in phased manner. Similarly, despite economic reforms in Nigeria and rest of the Africa, the foreign investment in these regions is declining sharply due to inconsistent policies, power outages, increasing input cost & crippling poverty etc., which are scaring away the foreign investors. In such scenario, it is a good sign that the country’s big banks have shown an interest in acquiring operations of HSBC Bank. “The report that local business groups have applied for due diligence in HSBC is not only a sign of recovery of country’s economy but also shows strength of local business groups which if supported by the Government can provide the much needed boost to local currently fragile economy,” said Intezar Mehdi a corporate lawyer working on foreign investment development projects. “The private sector has been playing its due role successfully in the country’s economic growth and developing businesses models of international standard,” Mr. Mehdi said. During last few years, many foreign investment groups decided to shut down their businesses in Pakistan and other countries due to various reasons, but the local private sector was there to replace them. In the privatization process in Pakistan, the local business groups acquired some big banks like Allied Bank Limited and MCB Bank and proved their ability to run these banks successfully showing tremendous growth despite global economic meltdown and prevailing security situation in the region. After the privatization in 2004, the deposits of ABL have increased by 18 percent, advances 22 percent, total assets 19 percent and 59 percent increase was seen in the tax paid by the bank. The bank offered more jobs and 10 percent increase was seen in the total employees of the bank. In the same way, MCB Bank also showed tremendous performance after privatization as its deposits increased by 14 percent, advances 13 percent, total assets 14 percent, taxes 24 percent while the bank’s employees increased by two percent after its privatization in 1991.
Now when some foreign banks are planning to shut down their businesses in Pakistan, the experts suggested that after the success of ABL and MCB Bank, the local investors should be given a chance to take over these banks as they are more competitive and strong enough to replace the foreign investors successfully.



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