Chinese eye Pakistan's real estate
QUETTA, Pakistan - Pakistan and China have already entered a five-year economic and trade cooperation framework to increase Chinese investment in the South Asian country. Some important sectors, including real estate, have also been identified for Chinese investors so that the country's industrial production can be enhanced.
Some 20 Chinese companies have committed to investing in the recently proposed Pak-China Industrial Zone, near Kala Shah Kako in the province of Punjab.This would be the first Chinese
industrial zone outside China in which leading Chinese groups would make investments and establish various projects. At a recent meeting with Pakistani Prime Minister Shaukat Aziz, a Ruba Haier Group delegation from China requested that the government of Punjab allocate land to the Chinese Industrial Zone on a deferred-payment basis and also proposed that the cost of the land could be recovered from the developers within 15 years.
Some other major Chinese groups have also visited Pakistan recently and discussed their investment plans with top officials in Islamabad. The government has already set up a steering committee to complete the exercise and come up with a final incentive package, as well as utility agencies to provide the required infrastructure so that work can start as soon as the land has been allocated. The incentive package would help the Chinese investors to finalize their investment plans in the proposed Pak-China Industrial Zone.
The real-estate business has seen a boom in Pakistan in recent years. The property market in the country has benefited from the present government's commitment to promote Pakistan as an investment choice. New real-estate projects in Karachi, Lahore, Islamabad and the future port city of Gwadar have built-in infrastructure to support the rapid development of housing schemes. On the other hand, the real-estate business has also developed rapidly in recent years in China, which has more than 20,000 property-development companies. The Chinese government has worked out policies and measures for the reform of the urban housing system to promote comprehensive development of the real-estate business.
China International Industry and Commerce Co Ltd (CIIC) has shown keen interest in constructing 10,000-15,000 houses for low-income groups and other development projects. The CIIC is currently planning the construction of housing units in the capital, Islamabad, which is considered a relatively safe city because of the presence of international diplomatic missions and government offices. Surrounded by green hills and beautiful landmarks, most housing schemes in the city and in the surrounding areas sell out quickly and have always been considered a good long-term investment.
In Punjab, about 200 hectares of land at M-III Industrial Estate in Faisalabad has been allocated for Chinese investors. The Rs4.25 billion (US$95 million) M-III, which will be the biggest industrial estate in the country, is being established on about 1,820 hectares.
The Xiao Changfu, dean of Chongqing Social Science Academy and deputy director general of the Chongqing government's Development Research Center, recently led a nine-member Chinese delegation to Pakistan to assess the country's investment climate. Xiao said China is keen to invest in real estate in Pakistan and that the delegation would present its report to Chinese chambers of commerce and industries.
Gwadar is another area where China's stake in real estate will prove strategic. After the completion of the deepsea port project, Gwadar is likely to emerge as a South Asian business hub and modern investment center. Property in Gwadar is considered a good investment and the speculative trade in real estate is booming there.
Islamabad has plans to establish hotels, motels, playgrounds, boating clubs, theme parks, marinas and other recreation projects in Gwadar. The future port city will be connected to the rest of the country by land, sea and air links. The government has decided to set up a tax-free industrial zone of international standard in Gwadar and it has acquired about 4,050 hectares of land for this purpose. Housing schemes and highrise construction on commercial plots are planned and will be up to international standards.
Officials in Islamabad claim that leading international investors have shown keen interest in Gwadar because of its strategic location and potential for becoming a major transshipment trade center in the region. Chinese companies are likely to invest in real-estate projects in the second phase of the Gwadar seaport project.
There certainly exists vast potential for Chinese companies to invest in Pakistan's real estate. The free-trade agreement (FTA) recently signed between the two countries also provides a level playing field for Chinese investors in Pakistan. Chinese products are penetrating deeply into the Pakistani market and, as a result, people regard China with suspicion, as these cheap products have driven many local manufacturers out of the domestic market.
Islamabad has welcomed Chinese investment in Pakistan and allowed Chinese companies to exploit the country's real-estate potential. During a visit by Pakistani President General Pervez Musharraf last February, the private sectors of Pakistan and China signed 19 agreements and memoranda of understanding worth $500 million to undertake joint ventures in various sectors of bilateral interest. The projects, mostly related to real-estate development, are to be implemented within the next four to five years.
Besides liberalization of trade in goods, the FTA covers investments, including investment promotion and protection, treatment of investment, expropriation, compensation for damages and losses, and dispute settlement. The deal will enhance economic cooperation between China and Pakistan.
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