Pakistan Prime Minister Shaukat Aziz said the biggest protests in his eight years in government aren’t serious enough to curb record overseas investment needed to sustain economic growth.
“Despite some blips which happen in any developing country, we have been vindicated because we have maintained our credit ratings, investment flows and growth momentum,” Aziz said in an interview on Sunday. “The judiciary issue is a serious matter, but 20,000 people demonstrating in a country of 160 million is not what we would call an uprising.”
Aziz, 58, a former Citibank executive, is betting sales of 61 state-owned companies and the stock market being at an all-time high will help sustain overseas investment estimated to reach a record $6.5 billion (Rs26,650 crore) this fiscal year. Still, escalating protests over the removal of chief justice Iftikhar Muhammed Chaudhry in the run up to nationwide elections in January may curb inflows.
“The appetite for political risk in emerging markets is higher but if politics had been more subdued, we could have attracted a lot more investment,” said Nadeem Naqvi, chief executive of AKD Securities Ltd, in Karachi.
Investments worth “billions of dollars” will come into power generation, hotels, the stock market, cement and banking, said Aziz, who became Prime Minister in 2004 after serving almost five years as finance minister.
Pakistan needs overseas funds in power projects because demand is forecast to rise at an annual pace of as much as 12% in the next three years, Aziz said. Demand for electricity rose 20% in the year ending 30 June, more than twice the pace projected, he said. “People have the money to buy electricity, demand has been much higher than all of us expected so we have to gear up,” Aziz said.
Demonstrators have burned tyres and staged protests in Karachi since May to protest against power outages lasting as long as eight hours a day in the country’s commercial capital. “Power is the single biggest hurdle confronting the economy,” said Naqvi. “My fear is that as pressure increases, the government will panic, cut unattractive deals and pay too much to the private sector for power.”
The government estimates foreign investment will rise from $3.8 billion in the fiscal year ended 30 June to spur economic growth to 7.2% from 7%. Pakistan needs political stability to ensure overseas investors join Standard Chartered Plc., and China Mobile Ltd, and sustain economic growth that averaged 7.5% in four years.
“Pakistan’s reform has been institutionalized to a large extent and codified in the law,” said Aziz. “The law can be changed by parliament but then the government of the day will have to explain to the public and the world at large.”
Rising investment and improved living standards may help President Pervez Musharraf, who is facing violent opposition to his rule after he removed Chaudhry in March. The president is seeking re-election before January’s parliamentary polls.
Faster growth is fuelling inflation, which has averaged almost 8% in the past year, compared with 2.5% at the time of the last parliamentary elections in 2002. That’s increasing food prices in a nation where about 70% of the population lives on less than $2 a day.