The Zurich factor
When the Romans established a Custom House at one of the ends of Lake Zurich in 15 BC, little did they realize that one day the city they thus founded would become one of the leading financial capitals of the world, certainly the wealthiest. By the 11th century, Zurich was developing into an important trade centre but it was by the 15th century that the shape of this wealthy metropolis in financial importance started to form. Today, this city is one of the greatest crossroads of capital and anybody seeking investment must pay homage to the merchants of Zurich (and thus Switzerland and a fair part of post-cold war Europe) by evoking their interest.
The Pakistanis came to town to invite investment in Pakistan armed with a new confidence taking hold of the economy. By concentrating on the economy in the first crucial period of his government, Nawaz Sharif instilled a priority that is now bearing economic fruit and for which posterity will give him unreserved plaudits. By a combination of privatisation, deregulation and liberalization of the economy, the present Government set out to undo the devastating economic policies that late Zulfikar Ali Bhutto’s PPP regime annunciated in the early 70s and which set back Pakistan’s economy a few decades. At the same time the present Government had to roll back the bureaucratic practices established in the 50s and 60s, import licencing and foreign exchange restrictions contributing to the stifling of economic growth, helping only the few engaged in lining their pockets. The first two years, till December 1992, have been a difficult transition period, not helped at all by the recalcitrance of the bureaucracy and by the devastating floods of last Autumn. Through it all, the positive indicators have continued to rise unabated, a reflection of this was seen in the Investment Seminar arranged by the Pakistan Investment Board in Dolder Grand Hotel in Zurich on January 27, 1992.
From the time that the hall overflowed to capacity and extra seats had to be brought in, it was clear that the organisation of the exercise was a resounding success. The gathering assembled spoke for itself economically. The major Multi-nationals were represented by at least two, even three senior executives. There were representatives from the industry and commercial sector but the greatest indicator of the interest that the Pakistan economy has generated, could be seen by the presence of a large contingent from the financial sector. Out of the 180 companies represented as many as 25 were banks and financial institutions. This was extremely significant as there is nothing that arouses the Swiss more than the smell of money. The gnomes of Zurich cast a tremendous vote of confidence in Pakistan’s economy by turning up in strength. There are certain things that can be arranged, the demonstration of financial confidence does not fall into that category. This was genuine and unadulterated, it was the surest indicator that Pakistan’s economy was coming of age.
The Seminar was jointly hosted by the Pakistan Investment Board (PIB) and Union Bancaire Privee, the private investment arm of American Express. The formal introduction was given by the President of the Bank, Edgar de Picciotto, after which Sartaj Aziz, Pakistan’s Finance Minister, gave the introductory address. Brimming with confidence, he laid out concrete figures on the economy that indicated a sustained growth pattern, as is usual with those in utter command of the facts at his disposal, the Finance Minister departed from the prepared text and went extempore from time to time. This went down very well with the audience at hand who, professionals all, could easily discern that this was not the normal appeal for funds by a Third World Finance Minister but a genuine invitation to the assemblage for partnership in the entrepreneurial sector in Pakistan.
By the time Nawaz Sharif got up to deliver his keynote address, one could feel that the mood of the assembled audience was extremely upbeat. In keeping with the soft style he has adopted for the intelligentsia, the PM made an effective soft sell, inviting the participants of the Seminar to form genuine partnerships to further augment the economy, at a profit to themselves and to Pakistan. The facts had already been laid out by Sartaj Aziz and Ishaq Dar, the young businessman who, as the Vice President of the PIB, is its executive head. Nawaz Sharif capitalized on the green indicators lighting up Pakistan’s economic route, a projection that one could see impressed even the hard-bitten skeptics among the audience. From the depth of their reaction, one could gauge that the PM clearly had a captive audience that saw profit in putting their money into Pakistan. By spelling out in exact terms, the incentives and concessions to the potential investors, the PM consolidated on the purpose of the exercise to attract investment into Pakistan. Despite the travails that he has had to endure politically and the natural causes that have set back the economic progress, the confidence of the PM in his economic policies as the major plank of his programme was easily apparent. It was a good and short speech, free of unrequired rhetoric, very business-like.
For pure mileage the best presentation on Pakistan’s economy was made by a hard-nosed financial professional with a critical demeanour, much more effective as far as Pakistan’s credit worthiness and risk appraisal was concerned. The speech of Mr. John Pott, the Islamabad-based representative (Chief Regional Mission) of the International Finance Corporation (IFC) to Pakistan and Central Asia, was extremely important. Bankers turn for professional opinion to other bankers and to this end, John Pott did an excellent job. By laying out the possibilities and opportunities, he spelt out IFC’s confidence in the present economy by listing the US $ 500 million investments made by the IFC in different ventures in Pakistan. Here was a financial professional speaking the language of money and risk that they could understand, duly impressed by the hard facts of IFC’s belief in the economy by its level and diversification of investment. He asked the rhetorical question, “why settle for 5% when you can make 20?” One considers that John Pott’s speech was the most significant of the entire day and it was a benchmark in the opening up of investment in Pakistan, clearly the seal of financial approval that the audience wanted to hear. Given our problems at the hands of western powers and the bad media attention we get, this was an extremely important endorsement.
In the PM’s entourage were a number of Ministers and Secretaries, the Ministries of Finance and Industries being represented in full, the Commerce Ministry sent its Federal Secretary. One considers that while this reflected the seriousness of purpose of the Government of Pakistan, we must be careful in choosing the mixture of personalities who represent us at such forums because the whole exercise may well backfire. The Minister for Industries, Shaikh Rasheed Ahmad, was thankfully not called upon to speak and certainly his greatest contribution was his silence in public. The Ministry of Industries is well served by its Secretary, Mr. T.Z. Faruqi, who made his presence felt in the one-on-one meetings that followed in the afternoon. A dedicated civil servant, his helpful attitude and pleasant demeanour is reflective of the new sophistication of a somewhat reformed bureaucracy. Earlier the Secretary General, Finance, Mr. Saeed Ahmad Qureshi, had carried out an excellent summing up. This was in utter contrast to the normal symbol of the 80s bureaucrat, the arrogant civil servant who does not recognize accountability, having utter contempt for politicians and businessmen alike while remaining in his ivory tower of intellectual superiority. In such a gathering, he would stand out as a sore thumb, a reminder of the bad old days when people like him destroyed Pakistan’s economy by a combination of their arrogance and ignorance. Such people have an attitude problem that sends out the wrong signals to potential entrepreneurs. Though one such person was present, thankfully a la Shaikh Rashid had no real inter-action in this Seminar. As regards Ambassador Kamal, one can forgive him, he has reason to be rude and abrupt to the media, my old teacher Khalid Hasan having touched raw nerves with respect to the driver he had sacked last year.
One feels that the PM would have done well by including senior representatives from the Ministries of Water and Power and Petroleum. The economy needs energy as a main fuel, its importance could be ascertained from the presence of a number of potential investors in the energy sector. This conference has shown that we have reached a certain level of sophistication in organisation, we must now give a balanced thought to team composition with special reference to our primary objectives, there can be nothing more important in this energy-starved world than investment in this sector. The conference was a resounding success and it is hoped that to keep the momentum going it will be followed in a couple of months by a similar conference in Pakistan where the investors whose seriousness has been ascertained can be invited to inter-act with Pakistani businessmen and put into practical effect the sum total of the discussions in Zurich. The major failure was the lack of media publicity. It is believed that Satchi and Satchi were the public relations firm hired to do the task, particularly the post-conference press briefing of the Finance Minister. Except for the presence of Reuter, this was an unmitigated disaster.
There is a saying that “you can take a horse to the water, you cannot make it drink that water”. Unfortunately we cannot afford that luxury and we must take potential investors to that final stage, mainly because of the arcane system that our former arrogant bureaucrats have sustained. PIB is a welcome “one stop shop”, but so was its predecessor Board of Investment, at least theoretically. Pragmatically putting the rhetoric into good use, good feelings have to be translated into investment facts on the ground. This can only be possible by ruthlessly stamping out bureaucratic foot-dragging. We cannot do without a bureaucracy but we can do without their capacity to delay and frustrate foreign investment. The PM cannot afford to compromise, he has to overcome vested interest, he must now eradicate the last vestiges. It required great political courage on his part to take on the bureaucracy in the opening up of the economy in the first place, to ensure investment does not shy away he must remove every recalcitrant bureaucrat from any appointment that can create obstacles to the present process. The Zurich Factor has been a measured success, it can become a resounding one if it is not frustrated by errant, intellectually arrogant bureaucracy.
In sum total, Zurich has created an excellent opportunity for the emancipation of Pakistan’s economy by the symbolic bursting of the dam of potential foreign investment. While congratulating the present Government, one must advise them to analyse the lessons from the exercise and remove the irritants for the future. From our vantage point we could discern genuine enthusiasm. This enthusiasm has to be translated into a functional reality.
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