Amid the Clouds, Some See Pakistan Silver Lining

 

By Tom Wright

 

Foreign investors have given Pakistan a wide berth the past couple of years, but some Western money is starting to see opportunities in the lack of competition.

 

Foreign direct investment fell 49% to $1.6 billion in the nine months ended March 31, according to figures from Pakistan’s central bank. Regular Taliban suicide bomb attacks and a 2008 balance of payments crisis ended a intense period of foreign takeovers of Pakistan companies from 2005 to 2007.

 

Now, a few hardy investors with an interest in Pakistan’s key agricultural and mining sectors are dipping their toes in Pakistan’s waters. They include Thomas Kaplan, a U.S. billionaire who invests in natural resources, and Lorne Thyssen-Bornemisza, a member of the Swiss-German family whose ancestors founded the ThyssenKrupp steel empire.

 

Ali Erfan, a London businessman who sits on Thyssen-Bornemisza’s investment committee and has a board seat on one of Kaplan’s companies, points to Pakistan’s liberal economy, which imposes few foreign ownership restrictions and allows repatriation of capital, as a major attraction. “With all its difficulties and troubles Pakistan does represent a good opportunity for the right investor,” he says.

 

Kaplan’s Electrum Strategic Resources, of New York, has acquired 22 licenses to prospect for gold and copper across Pakistan. The company plans to begin exploratory drilling this year, says Aamer Sarfraz (right), a Pakistani businessman who is Kaplan’s local partner and holds a small stake in Electrum.

 

Sarfraz, a 28-year-old businessmen who divides his time between London and Islamabad, also has set up a joint venture with Thyssen-Bornemisza called Agroventures Private. The company is constructing a $5 million cereal production factory in Rawalpindi, near Islamabad.

 

Pakistan, Sarfraz says, has high-quality agricultural products like wheat and maize. But lack of access to capital, owing to concerns over Pakistan’s political and economic instability, have stopped local farmers from developing their own processing facilities. “The market is wide open,” Sarfraz says of Pakistan’s agribusiness sector.

 

Agroventure’s factory plans to sell high-quality cereals locally. For now, a business foundation run by Pakistan’s armed forces is the only local competition making cereals. Nestle SA has a large dairy factory in Pakistan but imports its cereals from elsewhere, making the product too expensive for many Pakistanis, Sarfraz says.

 

His next project is to raise $50 million for a private-equity fund to invest in under-capitalized Pakistani agribusiness companies.

 

 

April 28, 2010

 

Courtesy: Wall Street Journal

 

Last updated: 29 April 2010