Portuguese investment in the country

• Making the most of FDI

In the last couple of years Pakistan has seen a rapid inflow of funds from foreign countries. In a recent statement, Portuguese ambassador to Pakistan, Joao Paulo Sabido Costa, said that Portuguese builders and developers are interested in investing in the country. According to the news report, Mr Costa while addressing members of Association of Builders and Developers (ABAD) highlighted how Pakistani builders could take advantage of modern construction technologies by this venture.

This statement has come after a series of meetings aimed at increasing bi-lateral cooperation between the two countries. Various news reports published since March 2017 had highlighted Charge d’ affaires of Portugal’s willingness in increasing trade ties with Pakistan, stressing on the healthy relationship that both have maintained over the years.

The venture is aimed at creating an environment where both countries can contribute to business and learn from each other with respect to construction activities. The ambassador also stressed on easing visa procedures to ensure easy movement of Pakistani builders to and fro from the country.

FDI inflows in Pakistan

The joint venture with the Portuguese builders and developers will come by means of FDI inflows that will help increase construction-related activity into the country. According to official UN reports, these Foreign Direct Investment funds are used by third world countries as a source of external financing and provide sustainable means of growth in the private sector. Statistics at Board of Investment (BOI) have highlighted that Pakistan has persistently recorded increases of FDI inflows in the country and currently growth in these stands at 56.4pc.

Growth in FDI inflows comes as a welcome move and suggests that there is high confidence in the economy amongst foreign investors. This further creates passage for more funds to flow into the country. FDI growth can be attributed to the realty boom that the country has experienced in recent years, which is also causing rapid expansion in associated industries.

Sector-wise data at BOI suggests that the construction sector in Pakistan has recorded the second highest inflow for Fiscal Year 2017-2018, after power sector. Currently, inflows in construction stand at $123.8 million and with this new joint venture with the Portuguese builders and developers it is only expected to rise.

Promoting international trade

Further news analyses have suggested that the apex of this agreement will be China Pakistan Economic Corridor as this is the main point of entry for most foreign investors coming into the country. Gwadar possesses various opportunities in realty, energy, and construction and therefore has emerged as an anchor for foreign investment in the country. The recent expansion in realty sector has provided leeway for foreign investors to plan their portfolios. According to Chairman ABAD, Arif Yousuf Jeewa, Pakistan currently faces a deficit of 12 million housing units, which accrues as potential in the market, waiting to be tapped.

The joint venture with Portugal will help bridge this gap and also modernise construction sector which currently faces a dearth in innovation.

Portuguese investment in Pakistan will act as a harbinger of growth in future by restoring confidence in the economy and laying foundations for innovative means of construction. CPEC is at a cross-roads between Central Asia and Europe and Portuguese involvement further solidifies it as a gateway to Europe.

Pakistan has so far been unable to tap into European markets more actively and needs to now create a demand for products. Products in this sense don’t necessarily talk about the traditional handicrafts and the many other traditional delicacies for which Pakistan has failed miserably in creating demand, it refers to a much more broad category of services and opportunities. These can be found in the thriving sector of real estate and associated industries such as cement, glass, etc.

Recent trends have shown that Pakistan has seen a monumental increase in the demand for cement because of increased activity in the realty sector. While local cement producers are meeting this demand, fears of a glut forming are evident in southern regions where CPEC related activity is reaching completion; while demand in northern regions of the country is still on the rise. Fears of a glut forming have surfaced only recently because the production units are operating at 89pc capacity and all this has to be consumed within the economy. This is the product for which the economy needs to create a demand in Europe to properly tap into the full potential of CPEC.

While Portuguese investment has come about as a welcome venture it is worth noting that this alone has taken a lot of decades. Now that Pakistan’s position on the cross roads between Central Asia and Europe has materialised, it is worth taking advantage of the routes and expanding our own industries. Without a clear policy the full potential of any foreign investment can never be utilised in the country and for Pakistan the time to act is now.