Foreign investment essential for development

By Zainab Ansari

It is quite unfortunate that at this particular point in time, when Pakistan’s economy is facing a number of critical issues and there is not a single good piece of news in sight, prospects of foreign investment in the country are further diminishing. As it is, given the serious nature of various factors that have had a serious impact on life in Pakistan over the last two years, the interest of foreign investors has waned so drastically that the investment pipeline has all but dried out.

Foreign Direct Investment (FDI) plays a positive role in any developing economy, and there is no doubt that such investment has made a valuable contribution to Pakistan’s development over the past few years. In fact, out of over 250 foreign companies currently operating in the country, some trace back their presence here to pre-partition days. The foreign companies operating in Pakistan and their local partners are engaged in a variety of commercial sectors, from pharmaceuticals and chemicals to oil and gas exploration and marketing, power generation, telecom, retail and wholesale, food and beverages, automotive assembly, consumer durables, agri products, insurance and banking, etc.

Pakistan has always appealed to foreign investors as a good investment destination. No wonder then that once foreign entrepreneurs have placed their stakes in their chosen sectors here, the accruing business results have encouraged them to further expand their operations. There is also no doubt that foreign investment has always been given due value and respect by succeeding governments in the past. Even when the Bhutto regime nationalised local industry back in the 70s, it left the foreign investment sector alone while in other countries foreign investment is usually the first to be hit if nationalisation is brought in.

Pakistan can also be proud that it was one of the first countries in South Asia during the 90s to liberate its markets and welcome foreign investment in almost every sector. This, along with the process of privatisation, encouraged reasonable foreign funds to flow into the country in the form of direct investment and portfolio funds. The country is still supposed to offer lucrative investment opportunities, but the reality is rather unpleasant as the experience of foreign investors over the past couple of years has been rather unpalatable.

For instance, economic experts are of the view that there was no need for the government to make a big deal out of the issues concerning the independent power plants, because this has made a big dent in the credibility of the government of Pakistan. Another good example is that of the Makro Habib Cash ‘n Carry and Wholesale Store which has been asked through a Supreme Court verdict to close its outlet located in Karachi’s Lines Area, within three months and hand the land over to the city district government of Karachi. This in effect means that a commercial venture closes down a running facility and deprives hundreds of people of gainful employment and all because some responsible officials did not check their files thoroughly - or deliberately chose not to.

The court has held that the land was included in the area transferred by the government of Pakistan to the Karachi Development Authority, now the CDGK (City District Government Karachi), for the 'Lines Area Project' and was reserved as an open space dedicated for use as a playground in the master plan of the project. Apparently, the CDGK was not aware when awarding a ‘No Objection Certificate’ to the applicants that the amenity plot was under its jurisdiction and could not be used to set up a commercial venture.

This sort of ignorance and confusion on the part of state organisations or city authorities certainly does not convey positive vibes to foreign investors who may be interested in partnering with local entrepreneurs to set up commercial projects in the country. Many a foreign investor looking to invest in similar projects would be interested in knowing why the actual status of the landholding in this case came to light after the project had been on ground for more than two years?

This hardly infuses confidence in local entrepreneurs and their foreign partners, and will force them to give serious thought about making future investments in Pakistan. In fact, such investors are now increasingly finding it difficult to do business in this country as the present government is proving to be increasingly inconsistent in its policies and its decisions are being subjected, as a matter of routine, to unnecessary delays. Such inconsistency and lack of coherence certainly prevents foreign companies from further expanding their operations in the country, which obviously translates into loss of potential FDI.

As Pakistan has had a fortunate economic record in the recent past, and competition for foreign investment is growing tougher between various developing countries, it is extremely important for the government to create a conducive investment climate in the country. It is certainly time for the administration to come out of its ad hoc approach and enforce a greater degree of seriousness in implementation of policies, rather than being driven by pressure groups.