FOREIGN INVESTMENT IN PAKISTAN

It is the right time to attract investors

By AMANULLAH BASHAR
June
16 - 22, 2003

Investment either local or from external resources is the key factor for creating economic activity, job opportunities as well as producing export surplus to foreign exchange for the country.

Recently, a two-day investment conference of the OIC countries was held in Islamabad which was certainly a timely decision on the part of the economic managers. There is a feeling that in the aftermath of Iraq war, investors from Islamic countries were naturally looking for the safer zones for investment of their surplus funds. This was the time to click to attract investors by offering incentives, highlighting strategic location of the country and on top of all the assurance for secure investment in this country.

The conference was attended about 200 foreign delegates and with an equal number of local industrialists and traders.

The conference also provided an excellent opportunity for interaction both at the government level as well as between the partners of the private sector. The conference discussed the opportunities for investment in Pakistan in the sectors like agriculture, small and medium enterprises, livestock, fish farming, biotech crops, biotechnology, water conservation, oil exploration, potential in hydrocarbon, replacement of furnace oil with coal, financing of cross border pipeline projects, copper-gold mining, financing sector reforms, foreign investment insurance and export credit, banking in the private sector, banking and privatization potential, information technology and a host of areas where investment is possible in Pakistan.

In the current financial year, there are strong possibilities that the total investment from external resources is estimated around Oone billion dollars while in the next financial year 2003-04, the investment from foreign resources is likely to take quantum jump.

The factors instrumental in inviting the attention of the foreign investment besides the consistency in the economic policies are the global circumstances which are equally important to draw attention of the foreign investors towards Pakistan.

It is however of vital importance to restore the confidence of the existing investors within the country both of multi-national companies as well as the local investors to develop credibility for friendly and secure investment environment in Pakistan.

In this connection, it is the need of the hour that all uncalled for irritants due to bureaucratic chains, corruption or complexity of the procedures are weeded out from the system.

There is also the need to have a careful look on the schemes and projects which are not responding in accordance to the policies of the government. In this connection the most appropriate case could be Karachi Export Processing Zone. It was established some 20 years ago. Some 200 units were sanctioned over a huge land of 500 acres with availability of entire infrastructure facilities. But, according to informed sources, only 40 units are operative and most of them are engaged with ready-made garment business. The foreign investors who had started business in the early staged had left the zone. The export performance of the zone is almost negligible which is said to be around $70 million. The government has provided all needed support, facilities, incentives and tax holidays but why such a hopeless performance when compared with the performance of other regional zones in the Dubai and Sharjah etc. There is a need to sort out problems and irritants if any faced by the investment within the Karachi Export Processing Zone. A better performance of the existing investors is the most effective way to attract the new investors.

Recently, the minister for industries had visited zones in Malaysia, Dubai and Bangladesh. As a result of this visit, the investors at KEPZ are expecting that same spirit and incentives and hassle free environment will also be provided at Karachi zone also. To improve situation at Karachi Zone is also significant especially in view of the interest shown by some foreign investors specially from China and Malaysia.

Pakistan is coming out with another important free zone at Gwadar which according to business sector can be the focal point of the investors in this region. In order to cash the situation, all irritants should removed to restore the confidence of the investors.

According to reports, investors at KEPZ are disturbed due to customs related problems, high infrastructure charges of the Export Processing Zone Authority, and the levy of 0.5 per cent cess by the Sindh Government on all imports, entering the zone which were duty free under the law.

According to a report, the Minister for Production and Industries, Liaquat Jatoi in a meeting had admitted that the levy of the cess is contrary to the concept of export processing zone and assured the traders to take up the mater for withdrawal of the cess immediately. However, the said cess continues to exist.

Hopefully, the problem will be resolved soon as the authorities have already promised to look into it. But it is important and in the national interest that the authorities be made responsible to nip such problems in the bud so that a hassle free environment could be ensured at the special zones.