OPIC a good example

A US official, while introducing a two-member delegation from the Overseas Private Investment Corporation (OPIC) stated that irrespective of the number of terrorist attacks in Pakistan, it is still considered a safe and potential destination for business and economic activities. This statement must be music to the ears of our economic managers. Before becoming euphoric about the statement, it is essential to acknowledge two facts.
First, that the US official was toeing the official US line, which is to support Pakistan in its endeavours towards development as the most effective means to forestall the spread of extremism and its fallout, terrorism. And, second, OPIC, as perhaps its title does not suggest, is an agency of the US government and its objective is to "foster economic development in new and emerging markets, support US foreign policy and create US jobs by helping US businesses to invest overseas."
What is of particular relevance, with respect to the OPIC delegation's current visit to our cash-strapped country, staggering under poor ratings from international risk-management services like Standard and Poor's, is that OPIC does provide political risk insurance against risks of inconvertibility, political violence or expropriation.
Additionally, it also provides financing through direct loans and loan guarantees and provides investment funds for seed equity. And finally, it also is engaged in advocacy. However, OPIC does not rely on handouts from the US government, but charges market-based fees for its products and services.
OPIC's activities in Pakistan, to date, are as follows: (i) Tameer Microfinance Bank, established in 2005 in Karachi, and operating at present in Karachi, Hyderabad and Punjab, with an OPIC loan of 16.5 million dollars; (ii) Tameer Housing Finance Company with OPIC support of 52 million dollars, designed to meet the 6.2 million unit shortfall; (iii) Two OPIC-Citibank agreements of 75 million dollars each, allowing Citibank to lend to Pakistani companies.
The borrowers have included northern cement plants, mobile phone expansion, Orix Leasing, Kashf Foundation and Engro Vopak Terminal Ltd; and (iv) OPIC has provided equity insurance to a power plant valued at 23 million dollars, to a treatment equipment of 4.1 million dollars and NGOs amounting to 0.2 million dollars.
However, considering that OPIC has operations valued at over 11 billion dollars throughout the world, coupled with the fact that Pakistan is a key ally in the US war on terror, Pakistan's share must be augmented. Those foreign companies/agencies, operating in Pakistan, like OPIC, have been reluctant to leave in spite of the political upheavals and terrorist attacks.
The reason is simple: the rate of return on investment in Pakistan is considerably higher than what is available in the rest of the world, especially today, given the ongoing global recession. Conservative estimates put it at around 25 percent. It is, therefore, critical for the government to approach these foreign companies and seek their input in terms of their issues and resolve them on an emergent basis. These companies are, after all, the best ambassadors for luring investors to Pakistan.