FOREIGN DIRECT INVESTMENT
An Interview Ahmed Shamsul Huda Acting Chief BoI
From Shamim Ahmed Rizvi, Islamabad
May 08 - 21, 2000
Under developed countries cannot achieve speedy economic development without foreign capital. History of world economy shows that less developed countries realized their dreams of economic growth within a shorter period with the help of external factors. Otherwise if they had financed their development programme out of their own resources, it would have taken them many decades to reach their existing level of economic development. China Malaysia and Indonesia are some of the examples of such countries.
It was with this objective of attracting foreign investment to Pakistan that a special high profile organization named as Board of Investment was established during PPP government to study how China, Malaysia and other developing countries managed to attract the foreign investors and initiate policy measures on the same lines to bring investment in the country. The organisation did useful work, prepared feasibities of various profitable projects in Pakistan, offered guarantees for protection of investment and repatriation of profits to the investors, and providing one window operational facilities to foreign investors including overseas Pakistanis. In the beginning the policy proved highly successful and over 2 billion US dollars were attracted mainly in the power sector, during 1995-98 period. Gradually, however, the flow of foreign investment declined for various reasons mainlly the frequent changes in political setup, dispute with IPPs, political witch hunting freezing of foreign currency account and the ongoing accountability process. The foreign investment during July 99-March 2000 period hardly touched the figure of 250 million dollars.
Presently the BOI is without its Chairman and even its Secretary. A senior Joint Secretary is looking after the organization which has a large set up.
Page put some questions to the acting Chief of BoI Mr. Ahmed Shamsul Huda who was kind enough to provide answer in writing, following are the questions and their answers.
Q. What efforts Board of Investment made during the year 1999 to bring foreign investment in Pakistan? What were the results?
A. The Board of Investment is a facilitator and promoter of FDI. Promotional aspect is linked with image building/marketing while facilitation is to serve the existing and potential investors. We have effectively projected the positive impact of the reformatory measures undertaken by the present Government for economic revival and improving the environment for investment which greatly contributed in the restoration of investors confidence. The Investment Promotion and Technology Transfer Event (Intechmart) jointly organized by the BOI, UNIDO, FPCCI & Export Promotion Bureau was attended by around 40 foreign companies from eleven countries to pursue investment / joint venture in Pakistan. Such response by foreign investors is manifestation and recognition of the serious efforts of the present Government for revival of economy.
Q. It is commonly felt the flow of foreign investment in Pakistan is constantly on the decline. Is this perception correct? Why?
A. The overall flow of Foreign Direct Investment (FDI) ranged between US $ 248 million to US $ 47 million during the last nine years. The abnormal increase in FDI during 1995-98 related to investment in power sector. The IPP issue adversely affected the investment in this sector. However, issues stands settled in respect of all power projects except Hubco, and active negotiation are in progress with them to resolve the issue. It may be noticeable that the inflow of investment of US $ 306 million was registered during July 1999-December 1999 as compared to US $ 248 million during the corresponding period of the last year.
Q. You incurred heavy expenditure on organizing "investment moots" in a number of foreign countries last year with special focus on Pakistani expatriates. Why you failed to inspire their patriotism to bring their money to Pakistan?
A. It is not correct that heaved expenditure was incurred on investment moots in Middleast countries. Gulf and Turkey. The conferences in these countries were organized in collaboration with the sponsorship of the Chamber of Commerce and Industry of respective countries as well as the Islamic Chambers of Commerce and Industry. These conferences successfully gained the objectives of presenting investment opportunities and invoking the interest of potential investors to pursue investment and joint venture in Pakistan.
Q. What are the prospects of foreign investment coming to Pakistan during the year 2000? Do you foresee any improvement in the situation?
A. A number of foreign companies and overseas Pakistanis have conveyed specific areas of their interest for investment. However, the factors of unstable economic conditions, distortion in the process of implementation of policies and law and order situation during the previous years were impeding the foreign investors to pursue their projects for investment. Improvement in the economic management, transparency in the working of government machinery, stable law and order situation would rekindle their interest to avail the recognized prospects of investment by the foreign investors. The recent visit of a number of foreign business delegation to Pakistan is an evidence of their revival of confidence in the policies of the present government.
The Acting Chief of BOI said that a high level delegation of businessmen from Greece which visited Pakistan last month showed keen interest to invest in the field of shipping, telecommunication, petroleum, gas, manufacturing of electronics, projects of Science and Technology and fish farming. The delegation felt there was a great scope of expanding economic relations between Greece and Pakistan and highly appreciated the economic measures adopted by the present government regarding restoration of investors' confidence, Mr. Huda added.
Earlier a 10 member Chinese businessmen delegation from different State enterprises, led by Voice Chairman of China Council for the Promotion of International Trade, Mr. Ma Yue, expressed desire to explore more areas of collaboration by China and Pakistan for Investment and Trade. Mr. Ma told that the Chinese Council (CCPIT) was a body authorized by the Chinese government to explore possibilities of Chinese Investment abroad and vice versa. He described the existing mutual investment between China and Pakistan as far from enough and stressed the need for increased economic collaboration between the two countries.
Acting Secretary, Board of Investment gave a detailed presentation to the Chinese delegation about the liberal investment policy, various incentives and facilities offered to investors in Pakistan. He also explained in brief the viable investable projects for investment in Pakistan in various sectors including Port & Shipping, Energy, Infrastructure, Electronics, Education, Health and Petroleum. A set of summary of sectoral studies done by BOI in the field of Electronics and Information Technology, Hydropower, Environmental and Infrastructure, Telecommunications, Pulp, Paper and Packing industry, Fishing, Fish Processing and Fish Farming was also provided to the leader of the Chinese delegation. Mr. Huda further informed the delegation that with the introduction of economic reforms package by the present government there were signs of improvement in our economy. The stable dollar-rupee parity, upward trend in share market are the indicators of confidence of investors in Pakistan economy.
The Board of Investment is confident that as a result of the visits of 2 high level delegation in two months and the keen interest expressed by their members in specific sectors, some positive response will be received in due course.