China's Suolang takes a step towards Pakistan
By Syed Fazl-e-Haider
QUETTA - China's determined effort to maintain its industrial presence in
strife-torn Pakistan was underlined last week by the signing of a memorandum of
understanding (MoU) between Hong Kong-listed chemicals-maker, Lumena Resources
Corp, and the KASB Group of Pakistan.
Lumena's interest is seen by local analysts as the first private-sector
initiative from China at a time when foreign investors have stopped even
visiting Pakistan for security reasons. Under the deal, an industrial park is
to be set up for Chinese companies to explore areas of mutual interest for
joint ventures in the South Asian country.
Pakistan direly needs overseas investment to bolster an economy that grew
barely 2% in the last fiscal year. Rising violence has not
only hampered efforts to attract foreign investment but also forced foreign
firms already in Pakistan to quit their operations.
Beijing, by comparison, considers its friendship with Islamabad even more
important in the current context of growing US influence in the region, and
China maintains a large economic presence.
Lumena, the world's second largest producer of thenardite, a mineral used in
making paper and glass, operates mines in China's Sichuan province.
Lumena's founder, Suolang Duoji, who took his company public in June with a
share sale and listing in Hong Kong, last week visited the Board of Investment
(BOI) in Islamabad where he discussed with the BOI secretary, Tariq Iqbal Puri,
investment opportunities available in Pakistan for Chinese businessmen in both
the public and private sectors, Business Recorder reported.
To attract overseas companies willing to brave the security risk, Pakistan
allows 100% foreign equity in the major sectors and full repatriation of
profits and dividends in all the sectors. Special economic zones (SEZs) are
being set up with attractive incentive packages.
Lumena's Pakistani partner, KASB, established by Khadim Ali Shah Bukhari in
1958, is seeking to diversify from its core of providing financial services
such as investment banking, research and asset management. Its other interests
include investments in technology, food and dairy, oil and gas exploration and
production.
Suolang's visit to Pakistan comes in the wake of a trip to China by Pakistani
Prime Minister Yousuf Raza Gilani in October, when several Chinese companies
showed interest in undertaking alternative-energy projects to help overcome
Pakistan's dire shortage of power. At that time, Pakistan's Alternative Energy
Board signed MoUs with China's Wuxi Suntech Power, China Electric Equipment
Group and the Solar Energy Research Institute for cooperation in
alternative-energy projects.
Gilani also used his visit to propose to Levin Zhou, president of China
International Capital Corp, a leading investment banking and research services
company, the creation of a joint Pakistan-China holding company aimed at
facilitating financing for Chinese companies intending to invest in Pakistan.
The Chinese have previously indicated plans to invest US$200 million in an
industrial estate in Faisalabad, which will eventually extend to more than
1,800 hectares.
More than 60 Chinese companies are at present involved in 122 projects in
Pakistan. The record however is not unblemished. In 2007, Shenhua Group of
China abandoned the $1.5 billion Thar coal project in Sindh, amid disagreement
over tariffs. The government of former president Pervez Musharraf planned to
use the 175 billion tonnes of coal deposits in the Thar area, the country's
largest untapped coal resource, towards generating 20,000 megawatts of power by
2016.
Continued Chinese interest is welcome in Pakistan as worsening security drives
away the likes of London-based Tullow Oil Plc and Budapest-based Millennium Oil
Limited (MOL), Hungary’s largest oil refiner. These companies have been unable
to continue their operations in North-West Frontier Province amid rising
violence there. MOL had started gas production from its Manzalai field in the
province after an initial $500 million investment.
Foreign direct investment fell 53.2% in the four months through October. In an
effort to bolster the economy, which the International Monetary Fund predicts
will grow only 2% this year compared with the 3.3% government target, Islamabad
is even appealing to Pakistan's eight million expatriates to do more to help.
Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development
analyst in Pakistan. He is the author of many books, including The
Economic Development of Balochistan (2004). He can be contacted at
sfazlehaider05@yahoo.com
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