Project assistance completion report : private investment expansion (391-0514)

As a result of the close-out of U.S. assistance to Pakistan mandated in the Pressler amendment (which took effect in 1991), The project"s"s scope was reduced and its PACD advanced from 8/97. Despite the Pressler cuts, the program continued to be highly effective. About the same time as the cuts, the new Pakistan government of Prime Minister Nawaz Sharif announced a major effort to liberalize the economy through deregulation and privatization, providing fertile ground for the program, which served as one of USAID"s main points of access to the government in conducting private sector policy dialogue. Later, however, toward the end of the program, Pakistan"s confrontational politics began to divert attention from the private sector and momentum waned. Still, most planned objectives were achieved in the program"s three areas of emphasis: investment promotion; capital markets; and privatization. In the area of investment promotion, a new organization, the Pakistan Investment Board (PIB), was established in 10/92. USAID consultants assisted and advised the PIB on all aspects of investment promotion. Other achievements under this component included development of about 30 U.S.-Pakistani business linkages (e.g., joint ventures, licensing arrangements); a successful revolving fund which provided pre-investment feasibility loans to local businesses; and financial support for the multi-donor First International Private Investment Conference, held in 1991. The project also made good progress in strengthening Pakistan"s capital markets through its assistance to the Karachi Stock Exchange (KSE) and the Corporate Law Authority (CLA). KSE computerized its settlement and clearing process and introduced several other modernizing improvements that have enabled it to increase its operations, attract significantly more foreign investors, and double its market capitalization. In addition, a Central Depository Company is being developed, which will eventually result in paperless trading at KSE. Other project efforts included four seminars in capital market development and market intermediation for KSE and CLA, development of a formal curriculum for a soon-to-be-initiated KSE Institute of Business Administration program to certify brokers, training programs at the U.S. Securities and Exchange Commission and the New York Institute of Finance, and a visit to Pacific Rim exchanges and regulatory agencies. The major effort under the privatization component, privatization of the Pakistan Telecommunications Corporation (PTC), was derailed after a complaint from a competing TA contractor led USAID/W to instruct the Mission to cease assistance to the PTC. Despite this decision, the initial privatization report received wide recognition. With assistance from other donors, PTC"s privatization is now imminent. Prospects for sustainability of program achievements are good in all three areas. Several other donors are involved in further assisting some of the entities helped by this program. Persons trained under the program continue to move to more responsible positions. Lessons learned included the following. (1) The Government of Pakistan"s (GOP"s) insistence that it approve private sector candidates for training was inappropriate and counterproductive; it was finally eliminated at the insistence of the Mission. (2) New implementation approaches require a great deal of time and management attention. The process of setting up a feasibility fund involving private sector firms as partners took nearly 2 years. (3) Time and nurturing are required to cultivate business alliances. Some 275 U.S. and Pakistani companies were interviewed to produce the 30 linkages that emerged from the program. (4) If momentum is not to be lost, fast-track contracting is required when providing TA to the private sector. (5) Time spent reshaping the program in light of Pressler restrictions could have been better spent in implementing program activities.