Pakistan economy could be hit by Dubai woes: minister

Says Pakistani investors put $6bn in Dubai

Saturday, December 12, 2009
LONDON: Pakistan could be hit by the Dubai debt crisis because investors from the country have put $6 billion into the emirate, mainly in the troubled real estate sector, a Pakistani government investment official said on Thursday.

“A lot of money — as much as $6 billion — has gone out of Pakistan and got stuck in Dubai, most of it in real estate,” Saleem Mandviwalla, minister of state for investment and chairman of the Board of Investment (of Pakistan), told Reuters in an interview on the sidelines of a briefing for the Asia House corporate programme.

“I think the Dubai picture is quite bad. Pakistan is going to be impacted by that, it’s going to impact the world.”

Dubai World stunned world markets last month when it announced a standstill on its debt payments. Around $26 billion in debt is due to be restructured, including the debts of property company Nakheel.

Dubai is not a major investor in Pakistan, Mandviwalla said, but United Arab Emirates capital Abu Dhabi is a bigger investor.

Foreign direct investment into Pakistan is continuing to fall, Mandivalla said, due to the global financial crisis, terrorism and problems with energy supply.

Pakistan is beset with a Taliban insurgency in the northwest and chronic power shortages.

Foreign direct investment averaged around $5 billion annually before the global financial crisis, Mandviwalla said, but has slowed down in the past two years.

“The global financial crisis has really shot down investment in Pakistan, terrorism is affecting investment and there is the energy crisis that we are facing,” he said.

“We will get over the energy issue quite fast, the global financial situation is getting better, but on the terrorism side, this will go on for some time.”

FDI has totalled around $1.0-1.5 billion so far for the fiscal year starting July 2009, down around 20-30 per cent on the previous year, Mandviwalla said.

He saw it returning to around $5 billion by the 2011-2012 financial year.

Net foreign investment in Pakistan fell 21.2 per cent to $910.1 million in the first four months, compared with $1.15 billion a year earlier, figures last month showed.

However, Mandviwalla said Pakistan had seen a rise in foreign remittances and a doubling in portfolio flows.

According to the latest official data, remittances from Pakistanis working overseas rose 32 per cent to $3.1 billion in the first four months of the 2009/2010 fiscal year.

Pakistan’s central bank governor said last month he saw little if any fall-out from Dubai’s debt crisis, and expected remittances from overseas workers to grow despite problems in the Gulf.

Pakistan’s stock market (KSE) has risen more than 50 per cent this year and debt insurance costs have fallen from extremely distressed levels.

The International Monetary Fund saved Pakistan from a balance of payments crisis with a $7.6 billion emergency loan package in Nov 2008, increased to $11.3bn in July.