Syed Marwan Shah

The energy sector of Pakistan has enormous potential to attract huge local as well as foreign investment.Foreign Direct Investment (FDI) plays an essential role in alleviating the balance of payments problems of Pakistan. Presently, the country is faced with economic constraints owing to the depreciation of its currency and a reduction in exports. In such a situation, the importance of foreign investment has increased manifold to overcome the prevailing economic crisis.

Based on the Sustainable Development Policy Institute's (SDPI) annual report on renewable energy, it is estimated that the transition costs of energy will amount to $101 billion by 2030, and another $65 billion by 2040, depending upon the completion of existing renewable energy projects, additional hydropower, transmission, and the gradual replacement of coal with hydropower.

According to the report, the energy sector of Pakistan offers great potential for domestic as well as foreign investment. Pakistan’s Board of Investment also said that the country offers attractive incentives and liberal policies for both local and foreign investors in all sectors of the economy. Pakistan has a unique geo-strategic location, skilled human resources and untapped growth potential to attract investment.

The incentives offered by the government provide an opportunity for the business community to invest in the country and reap maximum dividends in traditional as well as non-traditional sectors of the economy. The energy market of the country has attracted several international investors and has been a significant source of FDI. Investment in the hydro, wind and solar energy sectors is likely to increase and decline in the coal and thermal sectors in the coming years.

The World Bank Group (WBG), Asian Development Bank (ADB), and KfW Bankengruppe are three significant multilateral development banks (MDBs) that actively engage in renewable energy projects in Pakistan. The World Bank has been funding private-sector wind energy projects, such as wind super six, through the International Finance Corporation (IFC). Co-financing, direct equity, loans, grants and technical support have been offered through programmatic efforts by KfW, ADB, CDC Group and USAID for solar, wind, and hydropower projects to promote sustainable energy in Pakistan.

IFC has completed a $320 million financing deal for six wind energy projects with a total capacity of 310 megawatts. A $35 million loan from IFC helped Laraib Energy to fund a run-of-the-river hydropower facility in northern Pakistan. Additionally, it contributed $38.1 million to a Sindh-based wind energy plant run by Zorlu Enerji Pakistan Limited.

The ADB has so far funded 825 projects worth $38.68 billion in Pakistan. Most of these projects are focused on addressing the issue of climate change. The ABD has pledged $300 million for Balakot hydropower project in Khyber Pakhtunkhwa as well as another $300 million as a policy-based loan to encourage energy sector reforms in the country. Through 143 initiatives, the ADB has already contributed $10.3 billion to the country’s energy sector.

A loan of €70 million from KfW and AFD France will be utilised to execute the Harpo hydropower project in Gilgit-Baltistan. The refurbishment and development of the Mangla Dam, Tarbela Dam, and Kaitu Weir hydropower projects, which will generate 340 megawatts of power by 2024, are funded by the USAID through Water and Power Development Authority.

Credit : Independent News Pakistan-WealthPk