UK to fund projects worth 1b pounds in Pakistan

Britain will provide direct lending for schemes like infrastructure, roads, hospitals, and schools

KARACHI: The United Kingdom (UK) has announced financing projects worth one billion pounds in Pakistan, encouraging more British firms to set up facilities in the country, since Islamabad has improved environment for doing business as per the World Bank's ease of doing business index.

"UK announced an increase in our funding to support Pakistan from 400 million pounds to one billion pounds," UK Her Majesty's Regional Trade Commissioner for the Middle East, Afghanistan and Pakistan (MEAP) region, Simon Penny said, while speaking to journalists at the British Deputy High Commission in Karachi on Tuesday.

UK will provide direct lending into projects like infrastructure, roads, hospitals, and schools.

"I think this is a very good example how the UK is having confidence over Pakistan," he said. "Pakistan is very important market for us."

UK Deputy High Commissioner in Karachi Elin Burns said on the occasion that her country was actively working to boost investment and trade with Pakistan. She spoke about consistency and predictably in the economic policies of Pakistan.

Historically, Penny said, the funding was provided to UK's firms to do business in other countries through export credit agency, UK Export Finance (UKEF).  Now, the same funding will be available for Pakistani companies and projects.

 

UK to increase export volume with Pakistan to £1b

"It is the money that UK will make available to Pakistan for Pakistani companies and Pakistani projects," he said.

"For making that money available, we look for borrowers of that money to a source of minimum 20 per cent of the project from the UK, which is very favourable. It also provided a very safe return [of money] in terms of the law of the land which is…10 years or longer."

The funding is not intended to compete with commercial banks or private sector banks. What it intends to do is fund the projects that would not happen because the private sector was lacking the funding.  For example, banks remain hesitant providing such funding for long period of time like 10 years, he said.

Penny said UK is also working on the project as how to encourage more companies to enter Pakistan.

"I met some very, very important part of UK government strategy. It is encouraging more UK businesses to invest in Pakistan and do business with Pakistan," he remarked.

"We are very much focused on it [encouraging more companies to enter into Pakistan]. How do we sell Pakistan's investment stories internationally… there are many opportunities for international businesses in UK to do business here," he said.

UK is very encouraged, while looking at the World Bank's (WB) ease of doing business index.

"Last year Pakistan increased 11 places to 136…, which is a very positive movement and sends a very positive signal to do business in Pakistan," he said.

Improvement in placement in the WB ranking proves that Pakistan is taking serious measures to provide sustainable environment for conducting business to attract higher Foreign Direct Investments (FDIs).

"Pakistan is not a long way behind the ambition to come in top 100," Penny said.

"The focus that the [Pakistan] government is placing on the indices is very, very positive… that is something that the British government has favoured and committed towards Pakistan to improve working environment….We [UK aid agency] have invested heavily in programmes that support Pakistan's efforts to improve the environment for doing businesses."

He said that UK was also working on the projects like "how we [UK and Pakistan] can work together to increase the two-way trade between our two countries."

The total trade between UK and Pakistan during the fiscal year 2017-18 stood at 3.1 billion pounds. Interestingly, the trade balance remains in favour of Pakistan as Pakistan made exports worth 1.9 billion pounds to UK and imports worth 1.2 billion pounds.

"So you can see UK is a very important [export] market for Pakistan," he said.

Currently, the European Union has in place an agreement with Pakistan for GSP plus.

UK plans that once it leaves the EU, it will replicate that agreement. It has already worked legislation for the purpose.

This is Penny’s first visit to Pakistan during which he met a number of high-profile officials including Adviser to Prime Minister on Commerce and Industry Abdul Razak Dawood.