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 vast 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 an oil refinery complex, Board of Investment (BOI) Secretary Fareena Mazhar told local media 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 any company can seek the status of SEZ under the new rules and would be entitled to the same taxes and duties concessions available to SEZs. However, the company-specific SEZ would not be entitled to 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 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.
Initially, there was an expectation that CPEC would supplement the existing foreign direct investment, but the numbers speak otherwise. After China started making investments in Pakistan, the 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 compared to $5.7 billion in US investment during this period, said the secretary.
Between 2013 to 2021, the Chinese investment increased six-and-a-half times to $6.1 billion, but the BOI secretary said the US investment dropped three-fourth to $1.5 billion. 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 could not overcome its external sector problems.
After remaining in surplus for a few months, Pakistan’s current account deficit has started widening as the economy showed 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 the Chinese companies had taken significant investment withdrawal decisions. 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 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 per cent. The BOI has facilitated the local and foreign investors by resolving their grievances with the federal and provincial departments.
The secretary said that the China International Investment Promotion joint business portal had been established where the Chinese government recommended companies share their business proposals with Pakistani authorities. So far, 13 Chinese companies have shown interest. An investor relationship management system is also set up for tracking the issues being faced by foreign investors.