Pakistan’s government has its hands full. The cabinet of Prime Minister Nawaz Sharif, formed in June 2013, is simultaneously attempting to spark economic growth, privatize state-owned companies, resolve energy shortages and deal with extremists within and around the nation’s borders. As Finance Minister Ishaq Dar made clear in two wide-ranging conversations with The Nikkei, these efforts are designed to send a message to the international community: Pakistan is open for business.
But after a year and a half in power, how is the government faring? Dar, while conceding that infrastructure development and terrorism pose major challenges, stressed that the prospects for investment in Pakistan are bright.
Q: What are your economic growth projections?¬†
Our fiscal year starts July 1. Soon after we took the oath [of office] in June 2013, we [pursued] very strong structural reforms to fix the economy. They’re always painful, but I’m glad to share with you that … all of our macroeconomic indicators have shown very good performance.
We had almost an average [gross domestic product growth rate] of 3% in the [previous] five years. But we pushed for over 4% in our very first year. [We resolved] to make a full attempt to have GDP growth of 4%, and the next year 5%, the third year 6% and the fourth year 7%. So our projected GDP growth is 7% in the 2017 to 2018 fiscal year.
Q: Pakistan last year made a splash in the bond market.
A: We took the country back to the international bond market after seven years. We issued in April a conventional bond, a euro-dollar bond. It was heavily oversubscribed. We offered it for $500 million, and we got $7 billion [worth of orders]. By the way, we did not take $7 billion, we took only $2 billion.
For sukuk — Islamic bonds — in November we went again to the international market and offered $500 million. We were offered $2.3 billion and we picked $1 billion.
Q: You are moving to unload stakes in state-owned companies.¬†Do you have any fund-procurement targets tied to the share sales?
A: I can tell you the number of the state-owned enterprises [involved]: 31. There are three types of privatization taking place. One is pure privatization. We will be trying to sell electricity distribution companies.
The second is what we call strategic partnerships. We want to keep 74% [stakes]. If somebody comes and says, “No, we want 51%,” we can talk. Because they’re so huge: Pakistan International Airlines, Pakistan Steel Mills. With these types of entities we want strategic partners to come and work with us. We will give them the management, and they will improve efficiency.
The third is divestment of shares. For example, we had a certain amount of shares left in United Bank Limited, and we sold them all. UBL now is 100% private.
There are three categories, so it’s difficult to give you a figure. It depends.
Q: You recently signed the accord for the China-backed Asian Infrastructure Investment Bank. How do you envision the relationship between the AIIB and Pakistan?
A: This region, in totality — meaning all of South Asia, Central Asia — is getting 30% of the world’s infrastructure development financing. It needs 70% if we are to bring it to par with other countries in Europe, China, Japan.
This bank would meet the shortfall, or the extra demand, for infrastructure financing in the entire region. It will not compete: It will supplement the Asian Development Bank’s efforts, it will supplement the Islamic Development Bank effort, and it will supplement the World Bank and IMF efforts.
Q: China and Pakistan are also planning an economic corridor project, estimated to cost $45 billion. What are your hopes for this endeavor?
A: Our government’s preference is that as much of this package [as possible should] go into the private sector. For any infrastructure, energy and communication projects where there is no appetite in the private sector, the government of Pakistan will step in.
The economic corridor is not going to benefit China and Pakistan alone. It’s going to [bring] benefits to the entire region — to the Central Asian states, to India, to Afghanistan, to other neighboring countries. Even Japan won’t have to go to the Gulf to get things done if this economic corridor from Kashgar [in northwestern China] to Gwadar [in southwestern Pakistan] is activated.
It’s a win-win for everybody. We are quite grateful for China’s support, which they announced. Now we are looking to Japan for an equal package, hopefully.
Japan is an old friend. In Pakistan, we mostly see Japanese cars. Honda is there, Suzuki is there, Toyota, Hino. We are looking forward to the earliest [possible] visit — it has been almost a decade now — by the Japanese prime minister to Pakistan.
We have a history of bilateral economic and trade relations, and I think there’s a great scope to expand [the ties] further.
Read the entire Q&A With Pakistan’s Finance Minister on¬†Nikkei Asian Review
Compiled from interviews by Nikkei staff writer Taisei Hoyama in Tokyo and contributor Tahir Khan in Islamabad.