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09
Sep
2009
Foreign Investment Features for Pakistan

Government of Pakistan has many things on talking front. Their ministers always count on efforts (never on results). We appreciate it but the reality is worst than cosmetic talks. In the age of crises across the globe and when people lost million of dollars by their investment in Middle East and Americas, it is the time for government to present Pakistan as a best investment opportunity even with variables of regional unrest and some political crises. Let us not pass the message that we can not manage “Sugar Sale” in our country, so how we can park foreign investments properly. This at least can do one thing surely, it can stop the flow of capital from local businessmen of the country and then it ultimately attracts foreign investments. Yes I accept we have many problems but if we give a little attraction to foreign investors they will not hesitate to invest in Pakistan as every one know what Pakistan is capable of. Let us take a quick glance of Foreign Investments (FIs) of Pakistan over last four years. According to State Bank of Pakistan, below are the figures of Foreign Investment in Pakistan that will contain FDIs and Portfolio Investment. Net Flow of Foreign Investments in Pakistan July - June % Change In US $ Millions 2006 2007 2008 2009 over 07 Foreign Private Investment 3,873 6,960 5,429 3,210 -54% FDI 3,521 5,139 5,410 3,720 -28% Privatization Proceeds 1,540 255 133 - -100% Portfolio Investment 351 1,820 19 (510) -128% Here I have taken the % of change over 2007. It is just to show my readers the role, current political setup and elections 2008 have been playing on FDIs and other streams of Foreign Investment in Pakistan. Yes, there are many other factors than government but anyways government’s responsibility can not be ignored. The interesting aspect in 2009’s figure is; it contains 19% of total FDIs in Financial Sector, 21% in Oil & Gas exploration & 23% in Communication sector. Even though if you will see the decrease/increase within these sectors in term of FDIs over 2008; it is Financial Sector - 62%, Oil & Gas exploration 22%, Telecommunications - 46%. Now it really tells the performance and it is enough self explanatory. The fact I am highlighting is the failure in attracting significant foreign direct investment in Power from Coal, Textile, Consumer‘s Item Production, Leather, Metals, Infrastructure, Trade, Tourism, Transport, Storage facilities, Education, Healthcare, Fertilizers, Cement, Motor Cycles etc. All these sector need adequate investment to mature their exclusive potentials. Here my objective is not to explain over-detail of the actual status of FDIs in Pakistan but what is the psyche required to improve it with our given variables in short run for long term planning. I am more concern in overhauling attitude and zeal towards Pakistan’s Foreign Direct Investments in current environment. People talk too much about law and order and other issues that make Pakistan not a good place to park FDIs but I don’t accept it. We have seen investments flowing irrelevance of law & order and political unrest in general, over last 25 years. Generally law and order is also related to the economic freedom. This economic freedom is also a spark for foreign investors also. So, if we start taking moves for improving economic freedom, foreign investors generally calculate the environment of future and Return in dealing Gross Risks. It is all about what you are providing, Pakistan is stable to the extent; even Iraq can get foreign direct investments in the sectors they marketed exclusively in the time of insurgency and terror. The point is simple, we can not wait for the day when extremism, violence will be over but we have to work hardest to enhance economic process as a weapon against our challenges. I have no point in saying that peace and stability is not required for investment inducement but we have to make strategic arrangements within given variables and try parallel for peace and harmony in the country. Pakistan need to work on polices that will attract foreign investors with given risks of political unrest and regional war fares. May this will work for those who generally sponsor unrest in Pakistan and they will tend their focus towards business and industry. I know this statement of mine will not be accepted to economist but at strategy level it is very important as in my point of view, Terror, Extremism etc are also businesses in the world. U.S.A. got attacked once they were starting booking crises in 2001. May the investments in official businesses were not that viable than the investment in terror at that time. We need to create FDI parking ZONES that preliminary have to be administered by City Governments in Pakistan. These ZONES must be tax free, with minimum cost of operations and providing quality services via one window ops. Pakistan is the land of fertility in term of investment opportunities. If these ZONES could be made at CITY level so these cities can market their niche to foreign investors. I know people will object that Pakistan can not have Tax Free Zones. I ask why? If we are not having anything when the business is not there (in term of tax), so why don’t have foreign established units that will work tax free and they can generate employment for people and you can tax your own people to have share of this activity as Government’s Earning. It must be better than having nothing. At least we can test it as pilot project for two ZONES. These ZONES will govern Industrial & Services sectors. If you ask me about Dubai’s model for attracting outside investments, so I can say Dubai + good law & order can not be greater in impact (or opportunity) than Pakistan + Economic Freedom like Dubai + manageable political unrest. Location of Dubai’s port is not as excellent as Karachi’s and Gawadar’s neither the natural business opportunities. I have seen government representatives went for Friends of Pakistan forums to beg and asking AID. It is far better to have these forums to ask friends of Pakistan, how they want to start business in Pakistan with given regional unrest and war on terror going on in Afghanistan. Definitely there would be many businesses on the land of 170 million people. I am not talking about the various measures of attracting foreign direct investment here. You can read all these in academic books and speeches of our trade and economic ministers. I am raising a point, how we can start today with given variables. If you says we have RISKS embedded, so we have to give mitigates of risk to investors. We have to give attractions that make them understand that if we can manage our business on the land of Pakistan, there will be widest opportunities. Give good figures and reasonable probability to investors, they will definitely invest even today. They have seen investing in Middle East, North Americas and other part of the world and the case is well understood that Business Opportunities will not be measured on the conventional parameters anymore. We need to start anyways to cash it. Easy corporate regulations, independence of remitting profits anywhere, removal of red tapism, independent judiciary, sound level of business education and training, fair stock markets etc. are highly required for attracting foreign direst investments but when we are seeing potentials more than scenarios, so we have to market beyond. Just take an example of Thar Coal. See the pattern of investment on Energy from Coal in last two years. It is zero. What is stopping us in attracting foreign investors for this aspect of investment? I believe if we raise a voice the world want to catch this opportunity regardless of seeing how unsafe or safe Pakistan is. So take a start. Lets people employed in projects, lets people earn their living, lets people have enough money to educate their children, and then political setup to law & order will be perfect also. Don’t stop yourself on economic front. Utilize your potential. The only point I am highlighting by my message today in order to make Pakistan an attraction for foreign investment, is to understand the call of time. We can not get easily, the opportunity that we have today in the economic crises of the world. It is not the time for economic theory or big lessons of investment inducement; it is the time for strategy and action. We have to be positive in understanding that we are rich in resources country and we have to market our resources for our betterment regardless of given hurdles. I hope Pakistan will grow in term of FDIs and all aspect of economic freedom in next 10 years to see boom in its local markets as an attraction for foreign investors if our leadership become a little mature to understand all this.


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Munazza Rehman Says:

If govt wil give the half of these facilities to pakistani nationational living in the other part of the world having a money and wish both to invest in PAK we can easily over come from the on going economic crisis.....


27 - January - 2010 08:35:40 PM

Bint-e-Ali Says:

well this was reality

15 - December - 2011 02:06:43 PM

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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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