AHSAN A. SHAH
Sep 15 - 21, 2008
Foreign Direct Investment - a component of a country's national financial accounts are various investments of foreign assets into domestic structures, equipment, and organizations. However this does not include foreign investment into the stock markets. Foreign direct investment more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or bad.
United States is the largest recipient of foreign direct investment in the world and the largest investor abroad. As a result of this dual role, the United States has led negotiations in various international forums to remove restrictions on foreign investment and other market-distorting measures to maximize the benefits of such investment. In 2006, foreign investors spent $184 billion investing in U.S. businesses and real estate; the highest amount foreign investors have spent since 2000. The figures clearly indicate the dictatorship at least in the last 6-7 years if not all of U.S.A as far as the funnel principals of FDI are concerned world over.
Having said all that it is important to remember the ever resounding cliché, 'every thing that glitters is not gold', within the US; foreign direct investment is sparking a mixed reaction. Although the environment for foreign investors is still friendly, some Members of Congress and some in the public argue that the events of September 11, 2001, raise new concerns about the nation's economic security that challenges the traditionally open policy the United States has had toward foreign investment, particularly foreign investment in critical industries and in sectors that are vital to homeland security. As part of these concerns, Congress is considering legislation that would revamp the Committee on Foreign Investment in the United States (CFIUS), an interagency committee housed in the Treasury Department that has served Presidents since 1975 as the chief federal government organization responsible for overseeing the national security implications of foreign investment in the economy. In contrast to these actions, the International Trade Administration of the Department of Commerce announced on March 7, 2007, that it was creating a new initiative: Invest in America. The initiative appears to depart from the long-standing U.S. policy of official neutrality toward inward and outward direct investment by having the federal government actively internationally promoting the United States as a foreign direct investment destination. It also will serve as the primary U.S. government mechanism responsible for managing inward investment.
The reason to mention all this is to drive to a conclusion through an inductive mean that, "America sneezes the rest of the world catches cold." If there are mixed reactions in a country like America, which without a doubt have ruled the flow of FDI's then one does not have to be a rocket scientist to figure the nature of complexities involved in Pakistan when it comes to investments like these.
The political situation of the country needs no light to be shed upon, it takes one only few newspapers to actually sum it up in one word, "hopeless". Further to this the country's economic condition is shattered to a point that sometimes it feels as if a civil war is around a corner somewhere. Where the leaders of the country are still involved in concurring their ways to parliamentary vacated seats or positions of absolute power, it is not at all difficult to deduce a dismal outcome. To pinpoint the flaws or blunders already being committed by a recent Government; who I believe should already be counting its days at a newly appointed office, should not be a problem for most of us.
Crisis like I always say have two ways out and one of them is a way upwards because crisis always presents a situation where one can prove the worth of being faced by it. This Government faced with crises could actually come out as saviors if they start looking in the right directions and try to fix things out if not abruptly then at least gradually for the systems to swallow, but this unfortunately seems not the case.
FDI is one aspect of the economy; figures denote that there has been a lot work done in this direction and lot of banks, telecommunication, etc have walked into the country with huge amount investments primarily in infrastructure and employment generation ratios. The two previously being rock mounted questions posed towards the country's economic scenario. Even the ones who have come to us without any profound hard work involved face stringent issues which are actually making them think twice before they can actually start falling away.
These issues of never ending taxes, terrible power conditions, and debilitated security mechanisms in the country add up to a lot more hurdles in the way of these investments.
If one has to actually secure and provide a work friendly atmosphere where such FDI's can be nurtured to concrete levels of profitability at a macro level then the Government needs to direct its efforts, resources and all the more the policies which need to be more positive in sustaining these investments so as to give these FDI's sufficient cushioning from our side so that they feel a win-win effect which is not only important from the point of view of continuing the ones already here but also for the ones we need to attract to make our economy all the more fruitful and abundant for the coming generation to enjoy.