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Business Opportunities in Pakistan

3rd December 2002

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PAKISTAN IN PERSPECTIVE2001 - 2002

Area 796,000 Sq KmPopulation 140 MnWorkforce 41 MnGDP US$ 62 BnGDP growth 3.6%GDP / Capita US$ 443Inflation 2.6%Exchange rate PKR 58.5 / US$Fixed Tel. Lines 3%Cellular lines 0.7%

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PAKISTAN IN PERSPECTIVEcont’d

Revenues % GDP 11.3Investment % GDP 13.9

Literacy Rate 51%Universities 77

Public 42Private 35

I.T / BCS/MCSInstitutes 27ISPs 115

Registered Cos 43,000+Listed Companies 700+Stock ExchangeImprovement 41%

Industrial Estates /Zones 63Export ProcessingZones 3Software Houses 664

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GDP CONSTITUENTS

Agriculture25%

Manufacturing17%Energy

4%

Others24%

Finance & Insurance

3%

Construction2%

Whole Sale and Retail15%

Transport and Communication

10%

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KEY SECTORSCotton and Textile Industry US$8bn

Energy Production: Gas is 2.5bn cubic feet/day and Oil is 60,000 bpd

Tele density: Fixed Line 3% and Cellular 0.7%

Banking Sector: Deposits of US$22bn divided between 38 banksStock Market Capitalization of US$10bn

More than 200 Multinationals Operating in Pakistan in Energy,Banking, Food Marketing, Pharmaceutical etc. sectors

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Corporate Performance - ROECompany Sector 1997 1998 1999 2000 Average

Shell Pakistan Oil Distribution 30% 16% 22% 27% 23%National Refinery Oil Refining 36% 31% 33% 30% 32%Gilette Pakistan Consumer Items 6% 26% 33% 33% 20%Knoll Pharmaceutical Pharmaceutical 16% 19% 19% 26% 21%Glaxo Welcome Pharmaceutical 15% 20% 19% 22% 17%Colgate Pakistan Consumer Items 17% 13% 18% 21% 19%Nestle Milkpak Food 17% 24% 33% 32% 25%General Tyre Tyres 1% 17% 21% 29% 14%Siemens Engineering Engineering 23% 19% 10% 20% 20%

Source: Company Reports (annual A/Cs);ROE:Return on Equity

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OPERATING ENVIRONMENTO Changes in Economic Fundamentals

O Improved Trade & Current Account BalanceO Stable Exchange RateO Increased Foreign Exchange ReservesO Economic Sanctions Lifted

O Regulatory Environment in place for Private SectorO Deregulation / Privatization

O Pakistan can act as Trading Base to Central Asia

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PAKISTAN’S INVESMENT PACKAGE

Allowed as per guidelines - Initial lump-sumupto $100,000- Max Rate 5% of net sales - Initial period 5years

No restriction for payment of royalty & technicalfee.

Royalty &Technical Fee

50%50%Tax relief (IDA, %of PME cost)

0-10%***10%***0%***5-25%

10%**5%**5%**Customs duty onimport of PME

0.30.30.3NoMinimumInvestmentAmount (M $)

Initially 100% but tobe diluted to 60%within five years.

100%60%100%Upper Limit offoreign equityallowed

AllowedAllowedRemittance ofcapital, profits,dividends, etc.

Not required except specific licences fromconcerned agencies.

Not required except 4 specified industries *Govt. Permission

Services including IT& Telecom Services

Infrastructure & Social

Agriculture

OtherIndus- tries

Engg+ Chem, Agribusiness, housing &construction,tourism Cat(C&D)

Hi-Tech& ITCat(B)

V.A +ExpCat(A)

Non-Manufacturing SectorsManufacturing SectorPriority Industries

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LIBERAL INVESTMENT POLICYAll economic sectors open for FDI100% foreign equity allowedNo Government sanction requiredAttractive incentives packageRemittance & Repatriation of Royalty, Technical & Franchise Fees,Capital, Profits & Dividends allowedNetwork of Export Processing Zones (http://www.epza.com.pk)Foreign investment fully protected

Foreign Private Investment (Promotion & Protection) Act, 1976The Protection of Economic Reforms Act, 1992Foreign Currency Accounts (Protection) Ordinance, 2001

Agreements on Avoidance of Double Taxation ( total 51 signed)Bilateral Investment Protection Agreements ( total 42 signed)

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BUSINESS OPPORTUNITIES

MANUFACTURING & AGRICULTURE

ENERGY

FINANCIAL SERVICES

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MANUFACTURING&

AGRICULTURE

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TEXTILE INDUSTRYO Fourth largest producer of cotton in the World.

O Major global player in Home Textiles as it has advantage of wide-widthweaving capacity.

O Industry operates at market based pricing and is ready for free tradeunder WTO from January 2005.

O FDI in the textile sector doubles last year.

O Facing declining prices due to lack of branding.

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TEXTILE INDUSTRY - OPPORTUNITIES

Possibilities of Joint Venture / Alliance with partners who can :Support in Branding of ProductsHelp in marketing products for global distributionRelocation of machinery with product buyback agreements

Textile Machinery export to Pakistan

Textile Accessories export to Pakistan

Textile Chemicals and Dyes export to Pakistan

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OTHER MANUFACTURING SECTOR

Packaging material for branding and retailing of products

Distillery in sugar industry (3 mn tonnes production) and itsmarketing

Production of leather footwear

Engineering and Electronic

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AGRICULTURE SECTOR

Total Agriculture is US$ 7 bn, mainly in Crops and Livestock.

Amongst the largest producers of Milk of 27mn tonnes.

Mango production of 1mn tonnes, Citrus 2mn tonnes and Apple0.5mn tonnes [Export of only 0.2 mn tonnes ( US$ 70mn )]

Fertile land with 22mn hectors under cultivation but poor farmingtechniques, lack of storage and handling facilities and nopackaging facilities.

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AGRICULTURE OPPORTUNITES

Processed food industry based on Milk and Fruit Juices(Nestle is enjoying double digit growth)

Export of fruits

Investment in infrastructure like Storage

Food Packaging Industry

Shrimp Farming

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ENERGY

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OIL & GAS

Demand Production Deficit Demand2010

Oil(b/d) 386,000 58,000

328,000Import US$

3.3 bn/yr800,000

Gas(bcf/d) 2.9 2.4

0.5Unsatisfied

demand4.2

LPG 1,200 857343

Unsatisfieddemand

1,800

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OpportunitiesGas Exploration

CNG Filling Stations

Supply of Pipes and other Distribution Network

Participation in supplying natural gas from Central Asiathrough Pakistan.

Planned privatization of Distribution Companies

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FINANCIALSERVICES

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FINANCIAL MARKETSShallow market despite favorable regulatory framework

Bank Deposits of US$25bn (40% of GDP)Stock market US$10bn (15% of GDP)Corporate Bond market US$350mn (0.5% of GDP)

Large fiscal deficits have “crowded out” private sector

Lower government borrowing will divert US$1.5bn pa for privatesector

Sector going through consolidation with small fringe players beingreplaced by large banks and specialized companies operating in nichemarket

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OpportunitiesInvestment banking to develop new products for corporateborrowers

Development and marketing of consumer financingproducts for large banks

Asset management for both equity and fixed incomeproducts

Venture capital funds

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SUMMARYMarketing of products and services

Exports of quality fruits from PakistanBranding and packaging (Textile, Agriculture)

IT infrastructure and e-Commerce

Financial Services

Physical Infrastructure (Gas exploration and distribution)

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Pakistan High Commission

Conference on Business Opportunities in Pakistan16 Dec 2002 ( organized by Pakistan High Com., ITIS & SCI )

Trade Mission to Pakistan12-17 January 2003( led by ITIS & SCI, supported by Pakistan High Com andPakistan Export Promotion Bureau )

For more information … ...

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THE END