Hi Pakistan | 15 September 2004
US offers investment treaty to Pakistan
ISLAMABAD: The United States has offered Pakistan a bilateral investment treaty, provided the country enforces intellectual property rights, anti-money laundering law and creates conducive regulatory environment, says Alan P Larson, US Under Secretary of State for Economic, Business and Agricultural Affairs.
In a press talk here, Larson, who is also the key economic adviser to US Secretary of State Colin Powell, said he was here to put the fishing touches on the economic assistance component, which was promised by US President George W Bush at Camp David. Half of the $3 billion five-year package is for economic support and the rest for defence. "The Congress would vote for this money considering that Pakistan is a strong partner in the fight against terrorism, continue to promote regional peace and stability and continue on the path of democracy," he said. He said these are part of the expectations that both sides have while going into sustained assistance relationship.
He said one of his primary focuses of the visit is to explore possibilities of promoting the investment relations. Foreign Direct Investment in Pakistan increased to about $950 million last year that includes $238.4 million US investment.
Similarly, remittances sent by overseas Pakistanis from the United States totalled $1.23 billion out of $3.9 billion received during 2003-04. "The investment could go up by five to 10 times over time, if there is a strong Intellectual Property Rights (IPR) law, which is enforced very strongly," Larson said. He said he had raised the issue of IPRs with the government, which was very important to attract high-technology investment in knowledge-based industries to create high value jobs. The government has passed certain laws on the issue of intellectual property rights, but regulations are still being formulated. "I am encouraging the government to adopt strongest possible regulations, including measures covering the optical disk piracy, and backed up by strong enforcement."
Larson said a number of US businesses he spoke to see scope of expanding their presence in Pakistan. He said great potential in the Information Technology and pharmaceutical sectors, provided the appropriate laws are enforced. He also highlighted possibilities of investment in the infrastructure sector like electric power generation and privatisation.
The United States has already signed a Trade and Investment Framework Agreement (TIFA) with Pakistan, which basically provides a forum to discuss issues and suggest possible actions to promote trade and investment between the two countries. Larson said that the next meeting of the TIFA is due later this month in Washington. "We have been exploring the possibilities of negotiating a bilateral investment treaty to provide reciprocal protection to the investment," Larson said. He said the two sides are also exploring ways to get more engagement of the US EXIM Bank and OPIC in supporting specific investment opportunities. He said the two sides are working on a whole range of programmes to support the thrust of a private sector-led growth to reach the next level of economic accomplishment.
He said two countries have been exchanging information on respective models of an investment treaty, which is the first step. He mentioned many technical level issues, which need to be clearly defined before formalization of an agreement. Another issue that needs to be resolved, he said, is the specific terms and arrangement of the third party arbitration to resolve any possible business dispute.
He said the United States is the largest investment partner of Pakistan. He observed that direction of policies is right but there is a need to intensify second-generation reforms to address the structural problems and microeconomic issues. In this regard, Larson highlighted six key areas, including: IPR protection; Privatisation of the state owned corporations; addressing regulatory issues affecting small businesses; addressing high tariffs, like on packaging; laws to make it possible to have investment in the infrastructure, like electric power; and anti-money laundering law.
"I have reiterated today that passage of a strong Anti-Money Laundering Law (AML) is a very important element of the legislative programme," Larson said. He maintained that AML contributes in the war against terrorism, and in a way help business and investment climate. "There are links that connect the money laundering, terrorist activity and narcotics trafficking."
Larson said that his visit is meant to reaffirm US support for Pakistan as valued partner and a frontline ally. He appreciated the economic performance of Pakistan, a GDP growth rate of higher than six percent and strong export momentum. He said Pakistan could really become an export powerhouse once regional economies also grow. "I am here to discuss and deepen our economic cooperation." He observed that Pakistan has seen extraordinary progress in stabilizing its economy, but the best is yet to come, which he said would come through regional cooperation.
On the issue of rising inflation, he said this is something where all countries would need to watch very closely. However, he hoped that international fuel oil prices would continue to moderate to take steam out of the rising prices.
Regarding US travel advisory against Pakistan, he said his frequent visits to Pakistan show that it was important to come and visit Pakistan and they also reflect that it is possible to come and visit. "We just encourage our business executives to take appropriate care, but we are not telling them against visiting Pakistan," he said.
Larson said the US has updated its travel advisory relating to Pakistan to the positive direction, and added that it is continuously under review. Larson also announced that Pakistan has not asked for more debt write offs. "We have been focusing on our assistance dialogue to have more growth and investment."
Regarding the election of Shaukat Aziz as prime minister, Larson said the government has accomplished a great deal over the last few years. "I do feel that the new prime minister is working hard with his cabinet colleagues to establish a result-oriented government; tries to set goals; holds himself accountable; and is interested to create an environment where private sector could play its role to create new jobs."
He maintained that the US support for Pakistan is not about one man, but it is about the shared interests that the two countries have about the cooperation that two sides have been able to forge like economic cooperation, global war on terrorism, creating regional peace and security.
APP adds: US Under Secretary of State for Economic, Business and Agriculture Affairs Alan Larson called on Prime Minister Shaukat Aziz at the Prime Minister’s house, here on Monday to discuss ongoing economic relationship.
They also discussed $3.0 billion US economic package and funds for defence cooperation, education, health and social sector. The prime minister appreciated the ongoing economic support from the US and said that funds would be utilised in health, education and services sectors.
He said the government is getting ready for second-generation reforms, which cover a broad spectrum that include tax, education, administrative and legal reforms to ensure good governance. Shaukat said economic growth is expected to exceed the target of 6.6 per cent and Pakistan expects better future with emergence of strong middle-class and a gradual reduction in level of poverty.
Larson appreciated the improvement in macro-level economy and assured continued assistance from the US to uplift Pakistan’s economy. He said $3.0 billion US package for five years is a manifestation of the US government’s commitment for economic growth in Pakistan. The prime minister also discussed the subject of market access for Pakistani goods and need for increased investment from the US to Pakistan.
He said foreign direct investment has been increased in Pakistan, particularly in Oil and Gas, telecommunication, services and manufacturing sectors where more than 500 companies have been planning to invest in Pakistan. The prime minister said the private sectors of the two countries need to become closer to get full benefit from the economic potential of the two countries.