A consortium of Chinese state-owned companies has offered to set up a $15 billion oil refinery complex that may provide some relief to Pakistan, which is grappling with the challenge of huge outflows of foreign investment in recent years.
The China Petroleum Pipeline Engineering Company LTD (CCP) and China Zhen Hua Import and Export Corporation have shown interest to invest $15 billion in oil refinery complex, Board of Investment (BOI) Secretary Fareena Mazhar told The Express Tribune on Tuesday.
China Petroleum Pipeline Engineering Company Limited is a subsidiary of the China National Petroleum Corporation and the primary builder of pipelines in China.
The company has planned to set up the refinery in four years at a site, which is not located at any of the nine prioritised Special Economic Zones (SEZs) of the China-Pakistan Economic Corridor (CPEC). But the secretary said that the any company can seek the status of SEZ under the new rules and would be entitled to same taxes and duties concessions available to SEZs. However, the company-specific SEZ would not be entitled for the government-funded provision of utility services.
China is the third country that has showed interest in setting up an oil refinery in Pakistan after the United Arab Emirates and Saudi Arabia. The first two proposals have so far remained on paper.
Mazhar said that the BOI would ensure fast-track processing of the Chinese offer and has already requested the Petroleum Division to review the business preposition and respond to it this week.
The BOI makes efforts to bring in foreign investors but they get stuck in undue regulatory approval procedures, said the secretary.
She hoped that unlike the first phase of CPEC, which was largely about loans for energy and infrastructure projects, the Chinese would make real investments under the second phase of CPEC.
Initially, there was expectation that CPEC would supplement the existing foreign direct investment but the numbers speak otherwise. After China started making investments in Pakistan, US was the first country to withdraw or reduce its investment in Pakistan, said Mazhar.
From 2002 to 2012, Chinese investment in Pakistan amounted to $814 million as compared to $5.7 billion the US investment during this period, said the secretary.
Between the years 2013 to 2021, the Chinese investment increased six-and-a-half times to $6.1 billion but the US investment dropped three-fourth to $1.5 billion, said the BOI secretary. To a question about the government’s less focus on bringing the foreign direct investment, she replied that without increasing both the foreign direct investment (FDI) and exports, the country cannot overcome its external sector problems.
After remaining in surplus for few months, Pakistan’s current account deficit has started widening again as the economy showed some positive growth. The official statistics showed that from 2016 through June 2021, foreign investors withdrew $2 billion. The highest amount of $572 million or one-fourth of the total outflows was withdrawn in 2020.
Mazhar said that major investment withdrawal decisions had been taken by the Chinese companies. The Covid-19 outbreak caused huge losses and the companies facing capital shortages withdrew investment from Pakistan as part of their business strategies, she added.
“We have talked with the companies and are hopeful that the situation would reverse in three months, the BOI secretary said.
The Afghanistan situation and terror incidents like attack on Chinese workers in Kohistan are major obstacles to foreign investment in Pakistan. Before Dasu attack, the BOI was expecting $3.6 billion foreign direct investment in this fiscal year, which has now been downward revised to $2.8 billion, she added.
She counted different steps that the BOI took recently to encourage the foreign investors to invest in Pakistan.
The BOI has been encouraging the foreign expats working in Pakistan to apply for work visa. The number of foreign expats seeking work visa has been enhanced from 3,485 in 2019-20 to 5,035 by end of last fiscal year, showing an increase of 44%.
The BOI has also granted permission to 148 companies for opening branch and liaison offices in 2019-20 to 382 in the last fiscal year, showing an increase of 158%. The BOI has facilitated the local and foreign investors by taking up their grievances with the federal and provincial departments.
The secretary said that the China International Investment Promotion joint business portal has been established where the Chinese government recommended companies would share their business proposals with Pakistani authorities. So far 13 Chinese companies have showed interest. An investor relationship management system is also setup for tracking the issues being faced by the foreign investors.