Pakistan losing its potential to attract foreign investment
April 29, 2011
Pakistan has been spot as one of the potential markets for foreign investors who are shifting their business to Asian and African countries in a bid to capture unexplored regions with their technology, capital and money.
The developed economies are recovering with very slow pace therefore its signs will also reflect in developing economies of the Asia as matter of fact there is a paradigm shift of business activities to Asia from Europe, which has attained a saturation point and started exploring avenues in under-served and un-served markets like South Asia.
Countries like China, India and Bangladesh are attracting billion dollar of investment with their emerging economic and business-friendly policies but Pakistan has so far failed to grab the attention of top global brands because of lack of vision and uncertain trade plan of the government.
FDI in China has increased 29.4 percent in the first quarter of 2011 to reach US $ 30.34 billion. India received $18.35 billion in FDI in the first 11 months (April-February) of the financial year 2010-2011.
Besides fast emerging economies, Bangladesh also witnessed also constant growth in FDI inflow and showed increased of 66 percent to $570.80 million in January-June period of 2010 over the corresponding period of 2009, according to the latest numbers available by ministry.
The present government inconsistence policies, bad governance and additional burden on tax prayers have kept foreign investors to keep their capital out of country despite a lot of potential in developing and unexplored markets of Pakistan having more than 60 percent population consist of youth.
The State Bank of Pakistan (SBP) statistics showed 28 percent decline in Foreign Direct Investment (FDI), which stood at US $ 1.028 billion in Jul-March.
Economic Expert said that this is high time for the government to cash in on the trends of global economy and make Pakistan’s environments attractive for foreign investors with curbing the weakness in the present system.
Pakistan is the huge market with significant population of middle class up to 30 million. The youth is very vibrant and crossed 100-million mark in the country. The electrification has been completed in 50,000 villages, which helps increasing the TV viewers, awareness and knowledge of people. There are more than 70 million TV viewers and 100 million mobile phone users in Pakistan. All these factors are conducive for business and foreign investors, they said.
“Pakistan could be platform for foreign companies if the government takes series steps to control security and ensure investors for safety of their lives and property with concrete measures,” said Ameena Saiyid, President Overseas Investors’ Chamber of Commerce and Industry (OICCI). “Otherwise, investors will move to India, China and Bangladesh as alternatives market and Pakistan will lose an important chance to attract huge foreign investment, transfer of technology and advanced practices in businesses,” she said.
The Foreign Direct Investment (FDI) is likely to increase if the government improves the perception of the country (which is worst than reality of the country) its political stability, governors, law and order situation and provision of utilities.
She explained the importance of Pakistan in the region as growing economy of the world with lot of business opportunities in different sectors.
Multinational Companies (MNCs) are focusing to expand their business in Pakistan with handsome investment of capital, transfer of technology and advanced business practices provided that the government addresses their long-demanding issues seriously with consistent policies and concrete plan, she added.
Foreign investors and MNCs indicated five sunrise industry for investment including Corporate Farming, Agriculture, Infrastructure, Skill Development, Minerals and Alternative Energy such as coal, hydel, wind and solar energy/ power production.
The electricity crisis is challenge and opportunity alike as it could magnetize huge investment in the country. In three quarters, FDI in power sector showed 414 percent growth to increase more than 99 million. Similarly, agriculture, telecom, automobile and many other sectors can be a window of opportunity for investors and Pakistan.
There is a need to win the confidence of foreign investors in Pakistan, which badly hurt owing to inconsistence attitude and abrupt U-turn policy of the present government.
The foreign automobile companies have invested Rs 20 billion in recent years after the government made a plan with investors to flourish local industry. But the government has become backtrack from its commitment and allowed 5-year imports of cars to stop the growth of local automobile industry, which earn huge foreign exchange for country through exports of cars and trucks.
The telecommunication is also a sector, which attracted more than US $ 7.4 billion dollar FDI landed in 2001-2010 and generated Rs 615 billion revenues and thousands of jobs, came under attack recently as minister of interior Rahman Malik asked cellular operators to allow one SIM to an individual, which ultimately result of collapse of industry.
The auto and telecom sectors could continue landing billion dollar investment if the government provide them confidence and level playing field through policy consistency.
The government policy u-turn has not only cast negative impression on the investors of different sector but it also shakes the trust of foreign donors who pledge for aid to flood affected country.
The government business friendly policy will not only improve the economic situation of the country but it will also improve common lives of the people and strengthen the democratic system and confidence of masses and investors over political parties, expert said.