Engg Sector Lures Saudi Investors

By Syed Rashid Husain

Al-KHOBAR (Saudi Arabia), Feb 6: The engineering sector in Pakistan is attracting attention of a number of major Saudi companies. With the expectation that the Pakistani engineering sector is in for a major growth, some of the private Saudi entrepreneurs are positioning themselves so as to benefit from this expected growth in the industry.

Despite problems, there is a growing consensus here that interesting opportunities are emerging in Pakistan. The oil-rich Saudi Arabia and other Gulf Arab states, flushing with petro-dollars, are important for Pakistan from foreign direct investment perspective. In the wake of current political environment, the Saudis and the Arabs do not appear very keen to invest in the West. They have their concerns and rightly so. Consequently, the region has witnessed unprecedented flow of cash back from the US and the West. Some banking sources estimate the cash inflow in the region running into hundreds of billions of dollars.

These private investors, definitely, are on a look for secure investments. A considerable portion of this money has gone into real estate and construction within the Gulf. The construction sector is witnessing a boom throughout the region these days.

On the other hand, despite being a front line state in the war on terror, Pakistan does not enjoy a very favourable image in the West for various reasons. Hence, despite stabilization of the economy to a great extent and the local bourses outperforming other regional stock exchanges, Pakistan is yet to benefit in a significant way in the form of foreign direct investment, especially from the West.

With FDI in Pakistan lagging behind other regional players, investment from Saudi Arabia and Gulf remains a viable and interesting option. And, thus despite problems, Pakistan presents somewhat secure alternative from an investment point of view to a number of private investors from Saudi Arabia and the rest of the Gulf.

Pakistan is already witnessing growing investments from Saudi Arabia and other Gulf states in recent months. The local Al-Tamimi Group is also proceeding ahead with a $250 million real estate development project in Islamabad. Some of the companies from the Gulf are interested in real estate projects in Karachi and elsewhere.

The local Globe Marine Services is pursuing the stevedoring contract at the upcoming Gwadar port. Another local company is also reported to be working on a major investment in Pakistan.

One of the Saudi groups, that have taken a lead in investments in Pakistan, is the local Al-Tuwairqi Group. The Dammam-based group is already planning a number of projects in Pakistan. Al-Tuwairqi is already putting up a one million tons per year Iron plant in Karachi. This project is being built at an investment of US $130 million and the ground-breaking of the project is expected to be held early next month.

In phase two, the company also intends to build a steel billets plant with a capacity of one million tons per year. This plant would also cost $120 million. Al-Tuwairqi has pursued other business interests in Pakistan. Last year, it was declared the highest bidder for the Pak-China Fertilizer plant at Haripur, Hazara. The group had offered a final bid of Pak Rs514 million. The bid is now with the competent authority for approval.

Currently, the Saudi group, which is already running a steel plant in Dammam and in some other places of the world including the UK, is also in run for Pakistan Steel Mills. They are among the five candidates short-listed by the privatization commission.

Tariq Barlas, the CEO of the Al-Tuwairqi group, delineating his plans for Pakistan, says the group intends to establish industrial parks-sheds in the vicinity of their plants, where engineers and technical people could use their talent to manufacture various engineering products. The company would also be ready to sign a buy-back arrangement with those contracted to undertake the manufacturing.

Elaborating on the justification of investments in Pakistan, he says Pakistan is a growing market for engineering products. The average per capita consumption of steel in Pakistan is currently among the lowest, somewhere around 25 kg per person per annum. This, when compared to the global average of 160 kg per person, is very low and provides tremendous scope for growth.

He thinks that Pakistan has the potential of taking this average to at least around 80 kg, presenting in its wake tremendous growth opportunities.

Enumerating the investment environment in Pakistan, Mr Barlas says that despite assertions that one-window operation is in vague in Pakistan, foreign investors are still required to do a lot of leg-work to get things done. Bureaucratic procedures are still old and needs a complete overhauling.

In order to promote industrial growth, proper infra-structure also needs to be developed further. However, he conceded that some sectors of infra-structure have definitely improved in Pakistan over the recent years.