ISLAMABAD:
The government has deferred approval of a budget exceeding Rs5.4 billion for payments to foreign consultants hired to prepare policies and investment-grade documents aimed at attracting foreign investment from Gulf countries.
Approval for the funds, mainly for American consultancy firm AT Kearney and any other new foreign consultancy hiring, has been sought through a development scheme. The Central Development Working Party (CDWP), headed by Planning Minister Ahsan Iqbal, this week postponed approval of the “enhancement of capacity of federal government entities in preparation of policy, programmes and projects” by foreign consultants.
The funding is proposed from the Public Sector Development Programme (PSDP), although no asset will be created using the Rs5.4 billion of public money. Planning ministry officials said approval was delayed because the executing agency, the Public Private Partnership Authority (PPPA), could not justify work completed so far or demonstrate foreign investment brought in based on advice and work by these foreign consultants.
Prime Minister Shehbaz Sharif’s government decided in April last year to hire foreign consultants to develop new projects suitable for presentation to foreign investors after Gulf countries complained about the low quality of such documents. It is widely believed the bureaucracy lacks the right skill sets to prepare investment-grade projects.
Sources said the original project was approved in July this year for three years at a cost of Rs5.43 billion to prepare feasibility studies and project documents, but the consultants have now informed they can only provide highly technical advice and prepare pitchbooks for investment purposes. The Rs5.4 billion also includes Rs18 million allocation for purchases of two vehicles for foreign consultants.
A Joint Committee on Consulting Support (JCCS) has been tasked with reviewing and approving requests from federal ministries for engaging international consulting firms, ensuring alignment with national priorities, and determining the funding source for each approved assignment under this PC-I. Sources said AT Kearney has already billed the government $10.3 million or Rs2.9 billion for work completed so far. Of this amount, payments of about $2 million or Rs540 million have already been made.
Foreign investment remains a serious issue in Pakistan. Despite multiple forums’ attempts, there has been no increase in foreign direct investment. During the July-September period of this fiscal year, foreign direct investment plunged 34% to a mere $569 million compared to a year ago, according to the State Bank of Pakistan (SBP).
Planning ministry officials said the stated targets given to foreign consultants included creating 500 investment opportunities as a result of the firm’s engagement and preparing 100 pre-feasibility studies. Other outcomes included preparing 40 investment-grade pitchbooks and consequent signing of investment and commercial contracts.
The chief executive officer of the PPPA did not respond to a request for comments for this article.
Officials said the need arose to revise the four-month-old project due to foreign consultants’ inability to prepare project feasibility studies and PC-Is. Of the Rs5.43 billion, Rs3 billion had been set aside for payments to consultants only after preparation of feasibility studies and pre- and post-evaluation for PSDP projects. The objective of the Rs3 billion consultancy cost was to obtain sector strategy work, prepare pipelines of development projects and create “bankable” investments and PSDP projects, according to Planning Commission officials.
The CDWP was informed that the revised PC-I of the Rs5.43 billion project has been proposed because “most consulting requests have focused on strategic advisory, institutional reforms, and investment promotion activities, rather than on feasibility studies or preparation of detailed business cases”. However, Pakistan does not lack such foreign advice from agencies like the Asian Development Bank (ADB), the World Bank, the International Monetary Fund (IMF), Stefan Dercon’s economic transformation plan or McKinsey’s advice to various government bodies.
The CDWP was informed that the Rs3 billion earmarked earlier remained unutilised following the foreign consultants’ inability to prepare feasibility studies.
The primary objective of the revised programme is also to engage foreign consultants without undergoing the conventional Public Procurement Regulatory Authority (PPRA) procurement process, according to official documents.
However, the Planning Commission has also raised objections during the technical review of the proposed revised project.
The Planning Commission has sought “proper justification” for these expenses, saying the PPPA revised papers have only provided reasons, not justifications. The revised project proposes new components including Rs10 million worth of laptops, multimedia, travelling, boarding and other logistics for consultants valued at Rs30 million, and Rs50 million for capacity development of PPPA staff.
PPPA authorities were of the view that over the past year, AT Kearney’s engagement has delivered tangible results in shaping Pakistan’s investment landscape. They said a comprehensive diagnostic across ten key sectors was commenced, and five sector studies had been completed, leading to identification of more than 90 high-potential opportunities being translated into investor-ready pitchbooks.
It was also claimed that 12 investment-grade pitchbooks worth over $6 billion were finalised with subsequent sprints underway to expand the pipeline further. AT Kearney completed studies in information technology, food and agriculture, pharmaceuticals, railways and industries and production sectors. However, these studies have not translated into foreign money inflows.
Of the claimed 90 investment opportunities, over 50 are in tourism, seven in information technology, 32 in food and agriculture, 12 in pharmaceuticals, 26 in railways and 15 in industries. Moreover, 12 investment-grade pitchbooks were prepared and over 20 pitchbooks covering high-value opportunities across multiple sectors were under preparation, according to PPPA authorities.
It is also claimed AT Kearney has supported the government in moving from an ad-hoc approach to an institutionalised investment engagement model, building sustained linkages with strategic partners including sovereign wealth funds, government-to-government investors, and global corporations.
