Protecting foreign investment

Abid Saeed

13 December 2023

Published in: Business Recorder

Foreign investment plays a significant role in the economic development of a country as it boosts economic growth, supplements domestic savings and investments. It often leads to the establishment or expansion of businesses, which in turn creates job opportunities for the local population.

This reduces unemployment rates, improves the standard of living by bringing in new technologies, management practices and expertise into the country, leading to the transfer of knowledge and skills, fostering innovation, increasing the productivity of local industries and talent.

Over the years, Pakistan has attracted foreign direct investment in sectors like telecommunications, energy, real estate and consumer goods. However, the levels of FDI have been fluctuating due to security concerns, political instability, redundant administrative processes and an inconsistent business environment. Pakistan also receives substantial remittances from its diaspora across different regions of the world, including the Middle East, Europe and the US, which plays a crucial role in supporting the economy.

Remittances serve as an essential source of foreign exchange, contributing significantly to the country’s foreign reserves.

Pakistan’s agriculture, renewable energy, technology and manufacturing sectors have shown promise for foreign investment, though in recent times the real estate industry has shown tremendous growth as foreign investments in this sector have seen huge profits.

The question, however, is whether the successive governments are interested in securing more foreign investments in various industries and sectors while retaining already present investors in Pakistan? The answer is clearly ‘NO’.

There are several factors that hurt foreign investments like policy inconsistency, security concerns and above all administrative barriers and bottlenecks in doing business. Pakistan has seen just how foreign investors leave projects midway after facing severe crisis concerning time to time unrealistic, poorly designed regulations and systematic ransoms.

The reputation of foreign investors and key stakeholders around the world significantly influences more partners for investment. Additionally, the reputation of government institutions plays a crucial role in creating a favorable investment climate. Governments with transparent and efficient regulatory bodies, with minimal corruption and bureaucracy are seen as more supportive of businesses and tend to attract more investments.

Foreign investors thrive on stability and predictability. When administrative processes are unclear or subject to frequent changes, it creates uncertainty. Investors fear that changes in regulations or policies might adversely affect their investments, leading them to reconsider their commitment or hesitate to invest further.

We have seen in the past also that how political point-scoring and other administrative issues delayed the CPEC (China Pakistan Economic Corridor) implementation, which also contributed to lack of interest of foreign investors in the country. In past three four years, we have seen how many companies from different sectors, including ride hailing services and delivery companies have left Pakistan finding it difficult to do business.

Consequentially, this has created a sense of fear in foreign investors. Now, if we see in hindsight, what is the message shared across potential investors in Pakistan? Is Pakistan an investment friendly country? Do we have enough capable and responsible officers in our regulatory bodies that can sense the repercussions and potential damage of such actions? Can we attract investment in the country after showcasing the entire world, the way in which we threaten the business community, by putting them on a media trial before finalizing the inquiries?

There are many examples where institutions behave irresponsibly and damage the country’s ambitious policies. Lengthy and complex procedures as well as administrative inefficiencies have made it difficult for investors to navigate the regulatory landscape and start or expand businesses easily.

Despite these challenges, efforts have been made by the Pakistani government to address these issues and improve the investment climate. Initiatives such as the China-Pakistan Economic Corridor (CPEC), special economic zones and reforms aimed at creating an ease of doing business are the right steps towards attracting more foreign investment.

Recently, the Special Investment Facilitation Council (SIFC) was established, a positive move to overcome complex administrative procedures, a one-window platform to fast-track decision making and facilitate foreign investments.

Sustaining and increasing foreign investment in Pakistan will require continued efforts to address structural challenges, improve governance, ensure policy consistency and create a more conducive business environment. Additionally, focusing on sectors with high growth potential and leveraging partnerships with countries and international organizations can further stimulate foreign investment in the country’s economy.