Friday Letter Speak Up

India and China are two of the hot destinations for private equity investment globally, but what if you are another emerging market without the headline grabbing macro-economic numbers? How do you get people to understand your story? Pakistan’s nascent private equity industry has an answer.  

As the mature economies slow and seemingly drift into recession, private equity investors and managers alike are turning in ever greater numbers to the world’s emerging markets.

But not all emerging markets are created equal in the eyes of investors. India, despite taking top-spot in The Economist magazine’s 2007 ranking of the riskiest emerging economies, has seen a flood of private equity activity in the last couple of years.

Pakistan, India’s smaller neighbour, has perhaps unsurpringly hardly registered amongst the GP and LP communities. It has had its fair share of bad socio-political news too.

But like its neighbour, Pakistan is a country in the midst of rapid economic development; its economy having grown at a rate of over 7 percent annually for the last 4 years and estimated to grow by 7.2 percent in 2008.

The World Bank’s Ease of Doing Business Report in 2008 said Pakistan was the top performer in terms of economic reforms in South Asia. The market offers a diverse range of investment possibilities, particularly in the energy, communications, manufacturing, information technology and real estate sectors.

All of which is why the Pakistan Private Equity and Venture Capital Association of Europe has been established as a Europe-based association representing the interests of private equity and venture capital investors looking to invest in Pakistan.

Its formation is crucially timed with the Securities and Exchange Commission of Pakistan issuing draft ‘Private Equity and Venture Capital Regulations’; and the formation of a task force for venture capital chaired by the country’s Ministry of Finance.

The association’s objectives are simple: to provide potential investors with market information to make informed decisions, to be a platform for networking and sharing knowledge, and to be a conduit to relay to the Pakistan government and regulatory authorities the views and concerns of European investors.

It is a shrewd move to base the association in Europe. It should allow Pakistan to steal a little of India’s regional thunder, especially with the support of its influential founders, which include Nomura, JS Group, Coller Capital, CDC Group and SJ Berwin.

Few will need reminding that no two markets are the same – and that to apply such a simplistic approach to emerging markets is a double failing. In countries where the paint is still drying on many aspects of private equity investment [legislation, operational best practices, privatisation etc] it is vital that interested parties  work to ensure differences don’t turn into obstacles and that (relative) opacity doesn’t turn into darkness. Expect to hear more talk about Pakistan from now on.