'Romance with equities'
MANY Pakistanis have made it big in the international banking and financial sector. Ali Naqvi is one of them. Trained as an electrical engineer from Lahore's University of Engineering and Technology (UET) in the early 1990s, he did not quite feel like making engineering his career. Pakistan, at that time, was opening up its market and deregulating its economy; a degree in business administration came in handy for anyone wanting to land a wellpaying job. So he joined the Lahore University of Management Sciences (Lums) to get an MBA degree.
It was during his internship at a firm in Karachi when he kind of fell in love with the equities market, joining a brokerage company. "I had 6-7 offers at that time, but I chose the lowest-paid job," Ali told Dawn in an interview.
His ' romance' with equities continues today as the Head of Equities for Asia Pacific at Credit Suisse, the bank he had joined in the late 1990s. At Credit Suisse, he headed regional research and cash equities before taking over the bank's $1.5bn equities business in the region in 2010.
'There is a perception in the international markets that Pakistan's economic decline has stopped and the country is headed towards economic stability, with its corporate sector showing a strong growth of 12-16pc'
One of the most active foreign investment banks in Pakistan, the bank helped the government privatise the Kot Addu power plant in the 1990s and sell its residual holding in UBL for $387m in June last year. Now, it is working on the government's plan to disinvest its remaining stakes in Habib Bank in the international market - a deal that is expected to take 4-6 months and fetch over $1bn.
Besides helping the government implement its privatisation programme through capital market transactions, the bank also arranged international syndicated financing in November 2013 and March 2014 to shore up Pakistan's foreign exchange reserves to meet one of the IMF loan conditions. "We have arranged a (balance of payments) financing of $372m for Pakistan, which makes Credit Suisse the largest lender to the country after the IMF," Ali laughed.
At the same time, the bank is also involved in lending to companies in the country for the last 18 months. "So, we have different levels of involvement in Pakistan: we bring portfolio investment as well as work directly with the government and the corporate sector," he noted. "Our involvement here has had an impact on the development of the country's capital market and international investors' appetite for Pakistani risk."
Ali considers the UBL transaction very important for the country. "It was the first block trade from Pakistan for international investors after a hiatus of seven years, and the order book was oversubscribed. We expect the deal to help reopen the international market for Pakistan's future equity issuance as well as its privatisation programme," he said.
The UBL deal has been declared the 'deal of the year' and Credit Suisse the best foreign investment bank in Pakistan. "We must celebrate our success. These awards will bring Pakistan back on the radar of international investors."
What makes the country attractive to foreign investors? "There are multiple reasons for international investors' interest in Pakistan. Emerging markets like China are underperforming and there aren't many opportunities to get good returns in the US and Europe owing to low interest rates and weak recovery. Therefore, investors are moving into high-risk frontier markets like Pakistan where they think better growth opportunities lie," Ali said.
"In addition to these factors, there is also a perception in the international markets that Pakistan's economic decline has stopped and the country is headed towards economic stability, with its corporate sector showing a strong growth of 12-16pc."
Nevertheless, Ali said it would take some time and effort before foreign direct investment starts coming to Pakistan. "FDI represents a long-term commitment. We will have to improve our country's perception in the foreign media and ensure policy consistency and stability to woo FDI."
His advice for policymakers is to facilitate local investment in the country. No matter how important FDI can be in bringing new technology and modern business practices, "local investment can push economic growth much faster because local investors have a long-term and a bigger stake in their country. The government needs to help 10-20 guys grow big and inspire their countrymen to follow their example." He believed that the slowdown in the emerging markets and the oil price slump has provided Pakistan a big opportunity to revive the growth momentum. "Pakistan is one of few countries like the US and India that will hugely benefit from low oil prices. It offers the country an opportunity to push growth much faster than it had expected.