Political instability discourages investment in Pakistan
January 20, 2012
The internal political and security position of Pakistan is unlikely to be improved in the near future causing the country to substantially loss foreign investment and flight of capital. The incumbent government instead creating attractive policies for domestic and foreign investors focused its attention towards protecting its political interests resultantly major traditional investing countries chose not to make or reduced the level of their investment in Pakistan.
The government of Prime Minister Yousuf Raza Gilani, is in its fourth year but the state of the economy is stubbornly unchanged, the number of poor are constantly increasing mainly due to lack employment opportunities in the backdrop of burgeoning energy crisis, uncertain political and deteriorating security situation.
It is international phenomena that when the investors are not sure about the future of their investment they hesitate to invest money. For last many years the governments have failed to create conducive environment, best suited to both local and foreign investors despite huge potential and big consumer base.
The data issued by the central bank shows that major foreign investing and trade partners United States, United Arab Emirates and United Kingdom have reduced their investment in Pakistan. The combined investment of three countries is just $731 million so far against the substantial investment made just couple of year back, $2.2 billion. Economists also link the downward trend of foreign investment with the prevailing global economic conditions. “The foreign investors and their investments are well , even over protected in Pakistan” says Ali Nasir, Economist and commentator on socio economic issues. Multinational companies in Pakistan are continuously making profits and are repatriating dividends, Ali observes.
According to the SBP data China has also reduced its investment in Pakistan despite number of agreement and high officials’ visit to each other’s countries with the purpose of enhancing investment particularly in Pakistan. However, the Chinese investment trend is not encouraging as well. The Chinese have shown their presence in mining and exploration sectors says Ali Nasir adding that the Chinese will not open factories in Pakistan because their products of all ranges are easily available in markets across the country.
The economic situation is increasing poverty level in the country. according to the Asian Development Bank ADB in year 2005 over 22 percent Pakistanis used to live on average 1.25 dollars a day but the number has grown substantially since then mainly due to large number of lay- offs in the backdrop of energy crisis which forced many labour intensive industries to windup operations. Government has initiated Benazir Income Support Program BISP to help poor of this country but this program marred by the political intervention is still unable to achieve desired goals.
The energy issues were not address by the government during last four years despite hue and cry across the country. The controversial and costly Rental Power Projects were initiated in the country which alleviated the corruption to new heights. Thanks to the intervention of Pakistan’s apex court that took the notices of these historic corruption and recouped some of the stolen money.
To alleviate poverty from the country the government will have to ensure political stability and encourage not only foreign investment but local investor will also have to give incentive to initiate projects. Pakistani investors are also heavily making investment in industrial zones of other countries in Middle East etc.
Industrialization is the only answer to the poverty alleviation and takes the poor segment of the country out of the years of miseries. Economists pinpointed that the major portion of PSDP is being spent on security operations rather than the development which needs to be stopped now. There is no dearth of financial avenues available at global level as lot of money is in the hands of investors but safe heavens are needed to be provided to them.