EU warns against investment delay

Adidas among 20 firms to visit Islamabad; envoy flags child rights issue

ISLAMABAD:

A European Union (EU) official on Wednesday urged Pakistan to make a decision about a $1 billion investment offer by Maersk before the window closes, as the 27-nation bloc is set to host European investors in Islamabad to explore more investment opportunities.

Maersk's $1 billion investment doors are very much open, but if the government takes too long to decide, the company has other places to invest, said Jeroen Willems, first counsellor and Head of EU Cooperation in Islamabad.

EU Ambassador to Pakistan Raimundas Karoblis and Willems spoke to journalists ahead of the upcoming Pakistan-EU Business Forum, scheduled for April 28-29. Prime Minister Shehbaz Sharif is expected to inaugurate the forum, which will be attended by 1,000 delegates, and more than 600 business-to-business meetings will be held.

About 20 CEOs and vice presidents of European companies will be visiting Pakistan, including the vice president of Adidas, the largest European sportswear company.

About two years ago, Maersk – a Danish integrated container company – announced plans to establish a new port, a modern shipping terminal, and expanded supply chain and warehousing infrastructure in Pakistan. The investment was termed mutually beneficial for both Pakistan and the company, but there has not been any notable progress.

Willems said that Maersk's $1 billion investment was still possible at Karachi Port to use it for transshipment purposes.

To a question about difficulties faced by foreign investors, Willems said that towards the end of the forum, there will be a closed-door business-to-government session to have more honest discussions about the issues that investors are facing in Pakistan.

"Pakistan is not an easy market, and there are issues that will be highlighted in business-to-government sessions," said Willems.

The predictability of taxation and restrictions on profit repatriation are among the main issues impacting business sentiment in Pakistan, he added. The EU values Pakistan's large market, young middle-income class and huge reserves of critical raw materials.

It will be for the first time in years that Europeans will be coming in large numbers to explore investment opportunities. Pakistan has been struggling to maintain foreign investment momentum, mainly because of red tape and governance-related issues.

EU-Pakistan discussions over the years have largely remained concentrated around duty-free access to European markets. Pakistan earned $8 billion, or 28% of its total export proceeds, from the EU in the last fiscal year, followed by 19% from the US and 14% from China, said the ambassador.

Only 300 to 500 European companies are working in Pakistan, compared with 4,000 Dutch firms doing business in Singapore. Responding to a question, Ambassador Karoblis flagged issues of child rights, human rights, freedom of expression and media rights as matters of concern for the EU.

"It will be very difficult for Pakistan to compete in European markets if it does not have duty-free access," said the ambassador.

The current GSP Plus scheme ends in December this year, and the country will have two more years to transition to a new scheme.

"The government is much interested in getting investment but less inclined in trade, despite the fact that trade can bring more investment," said Willems.

"We can bring horses to the water, but we cannot force the horse to drink the water," Willems said while responding to a question about the possibilities of new investment in Pakistan amid anti-investment policies.

He said many companies are not considering investing in Pakistan because they are either afraid or do not know Pakistan well. The purpose of the EU-Pakistan Business Forum is to reduce the element of fear and anxiety among European investors, said the head of cooperation.

The EU has also launched the Global Gateway initiative, aimed at de-risking $400 billion in investment. Local companies can coordinate with European investors and financial institutions under the initiative.

The business forum had been scheduled for May last year but had to be postponed due to India's attack on Pakistan. There are again clouds of uncertainty due to the ongoing Middle East war. Pakistan can tap into a market of 450 million wealthy people, but it must improve economic governance, said the ambassador.

Karoblis said the European Investment Bank is also coming back to Pakistan after 10 years. The EU will also register the EU-Pakistan Business Network as a Section 42 company in Pakistan to address issues faced by European investors.