‘Pakistan needs an Investment Coordination Council’

An interview with Sardar Tanveer Ilyas Khan, Chairman Punjab Board of Investment and Trade

Sardar Tanveer Ilyas Khan is a real-estate magnate. He is best known for developing Pakistan’s first mixed-use commercial complex, The Centaurus, Islamabad. A testament to his entrepreneurial grit, the mega-project went through economic and political tumults of the times until it finally completed in 2013. A transition towards public service started last year when Sardar Tanveer became a minister in Punjab government’s caretaker cabinet (Jun-Aug 2018). In January 2019, he was appointed as the Chairman of the Punjab Board of Investment and Trade.

BR Research recently sat down with Sardar Tanveer and discussed his plans to attract investment in Pakistan’s largest province during another era of economic turbulence. Selected excerpts are produced below:

BR Research: Coming from a private-sector, real-estate background, how have you found this role of heading a major Investment Promotion Agency (IPA)?

Sardar Tanveer: We as a country need the right people for the right job. If you placed an investor and entrepreneur like myself on an IPA’s board, be it at the federal level or the provincial level, it would be entirely relevant and essential. As Chairman of the Punjab Board of Investment and Trade (PBIT), I have found this transition very comfortable. I know what the business-related challenges are and therefore I can understand investors and businessmen better.

Listening to investor concerns is a major part of this role. I am glad that there is no communication gap between PBIT and the business community. I can be approached by them at any time of the day. When I interact with investors, I understand their plans and their requirements for the future. We have so much interest from the local business community that we don’t have the time to go abroad and conduct road shows.

BRR: So how interesting is this role when investment inflows are on a decline and economy is undergoing stabilisation?

ST: We in Punjab have several things going for us. Punjab is one of the most populous regions of the world; it’s the largest in Pakistan, accounting for 65 percent of GDP. The province has better infrastructure and labour skills compared to other provinces. If you are manufacturing in Punjab, you don’t have to cross into another province, so you can save on costs and duties. We have direct road linkages with all the provinces. We also have a strong base for raw materials that industries and agro-processing units can source from. Thanks to the sacrifices made by the armed forces, police, and the public, the country’s law and order has also improved a lot.

While Punjab does have those natural advantages and investors can make profits here, the foreign investors require smart regulations. There are just too many procedures and permits involved, which cause delays, eventually leading to failure in an investment’s financial close. Our job is to simplify and facilitate.

BRR: How do you think PBIT can better market Punjab to investors?

ST: I have observed that marketing our strengths and achievements is done best through organising or participating in agriculture expos. This year, the agriculture expo attracted over 60 foreign delegates; last year when I was minister, the number was about a dozen foreign firms. This will tell you that foreign interest is improving in this market compared to last year.

BRR: Have you developed a pipeline of investments at PBIT?

ST: We have an investment pipeline of $5 billion to $6 billion. The potential investors include a large Chinese company that is interested in investing over $3 billion in sewerage and filtration processes. This area is posing a big problem for Punjab where water is short, lines for drinking water and sewerage are getting mixed up, and water is being consumed without metering. I have proposed to the Chinese company to start from a $500 million project and see the results. They have a solid business case.

There are certain difficulties in materialising these prospects. But the government is committed to move towards smart regulations and to improve the ease of doing business. There is a perception of political risk as well. But we need to communicate to investors that their investments will remain secure regardless of the changes in the political landscape.

BRR: Given that PBIT depends on federal approvals as well, what is the current state of coordination between federal and provincial boards of investment?

ST: Presently, I doubt that there is any coordination between federal and provincial BOIs. I don’t think federal BOI is the one-stop shop that they claim to be. But they should become a one-stop shop, because it will help the provinces to improve as well. Only Punjab currently has a vibrant IPA. Other provinces are lagging behind.

I personally feel that Pakistan’s investment framework needs something on the lines of the Economic Coordination Committee (ECC). Just as the ECC, the federal and provincial boards of investment should have an Investment Coordination Council. This council can be headed by the federal government, with provinces as its members. I feel that this arrangement can help resolve a lot of territorial issues and lead towards better synchronization of investment promotion efforts.

BRR: Let’s turn to your investment strategy. What are you banking on?

ST: Firstly, PBIT is interested in introducing an investor membership system to motivate both new and existing investors. This will involve a services-based distinction for Platinum, Gold and Silver members. For instance, for a new investor willing to register as a Platinum member, we will offer a commitment that all registration services and processes will be completed for them within 30 days.

Secondly, as the country needs exports to grow, we are focusing on export-oriented industrial sectors. Punjab currently has 68,000 industrial units; but there is potential for thousands more. In fact, you can easily take the number up to 200,000 units. We can get some guidance from China here. There is a list of 313 items under the new Pak-China FTA. Barring 70-80 items, we can export the rest and help bring down our trade deficit with China that came in at almost $15 billion for FY19.

And thirdly, we will be focusing on agro-based industries that add value to the produce of the land. There is immense potential for value-addition in basmati rice, wheat, fruits, dates, pulses and seeds. Already some results are visible. For instance, from next year, UK’s major departmental stores like Tesco and Sainsbury will have Pakistani mangoes available in retail packs. These value-added, processed food products will get us top-dollar in the international market, as compared to merely exporting commodities.

BRR: Compliance with country-specific standards and certifications often comes in the way of such plans. In that context, what can be done to improve the quality infrastructure for agro-based exports? Does the PBIT have a role in creating awareness and capacity building in this area?

ST: The systems are getting better, and many businesses are conscious to invest in these processes and in packaging as well. But to achieve international level, we obviously need to invest in quality standards, testing & inspection services, and treatment facilities like cold storage.

But the quality infrastructure cannot be improved overnight. This is a process that will take many years. Today if Pakistan is exporting $450 million worth of electric fans annually from just one district (Gujrat), it is because quality was built and maintained over generations. If we really want to make Pakistan synonymous with quality exports, the responsibility lies with the leading industrialists in respective fields.

BRR: Earlier you mentioned Punjab’s agriculture base that can supply industries with raw materials. However, given looming water scarcity, wouldn’t Punjab’s agriculture base be under threat in the long run?

ST: Indeed. We are an agricultural country but we are already importing $1.5 billion worth of kitchen items every year. And these imports will only grow if the right steps are not taken. For the same reason (water shortages), there is tremendous investment potential in introducing drip-irrigation techniques. In addition, we need to go for small to medium dams. Otherwise, we will face the crisis in a decade’s time.

I am insisting the government to let us offer land – even barren land – so that we can invite Chinese, Japanese and Korean companies to bring their high-tech systems and test drip-irrigation techniques in Punjab. But it is challenging to acquire land – even though hundreds of thousands of acres of land is lying idle in barren areas in the south.

BRR: Towards the end, let’s ask you about the challenges that you confronted while developing Pakistan’s first mixed-use complex.

ST: You can write books on our story. When we acquired the land in March 2005, those were comparatively better times. Since this was the first of its kind project in Pakistan, many of our architects, contractors, project managers, and engineers were recruited from abroad. Then a series of bad events followed shortly after.

First, there was a fatal earthquake that struck Islamabad in October 2005; it was the time when he had already designed the project in detail. So we had to make revisions as per the new building codes. When we finally launched the project in August 2006, it was just a few days after the death of Akbar Bugti. After that, we only got about seven, eight months of working on the project. In March 2007, then chief justice was sacked, triggering a large protest movement for the rest of the year. Then ex-prime minister Benazir Bhutto was murdered in December 2007. A few months later, the entire political system changed and the PPP government came in. Those years also saw peak terrorism inside major cities.

All those events affected the project feasibilities and timelines. Many of our foreign professionals were reluctant to work here. Our targets were not met. In short, we faced the music! But not for a single day did we stop the project. Quoting my own experience, I will underline the fact that political stability is extremely important to build mega projects in this country. While governments change at intervals, investors should not suffer. This is also important in the context of materialising next phase of CPEC.

BRR: Almost all indicators point towards an economic slowdown. How has it impacted the mall economy, which you must be examining closely?

ST: It is true that fuel prices have gone up and inflation is also rising. There may also be an economic slowdown underway as you mentioned. But I have yet to observe a single major shopping mall that has been deserted by consumers. I don’t see empty parking lots either. In short, I haven’t seen an impact on the mall economy. As for other malls in Karachi and Lahore, we have interaction with them and we know the numbers. There isn’t much change. I personally think that buying power will improve in coming years.