DECLINING FOREIGN INVESTMENTS
Apr 30 - May 6, 2012
Fraught with political instability, debilitating law and order situation, weak infrastructure along with insecure business environment, it is hardly a surprise to see foreign investments are declining.
Other known reasons, apart from the above, are said to be the lack of good governance both at provincial and federal levels, ad-hocism, widespread corruption, unfair business practices, monopolistic culture, and an absolute deviation from officially announced policies and procedures.
Foreign investment into Pakistan fell nearly 65 per cent to $516 million in the first nine months of 2011-12 fiscal year as direct investment dipped by almost half and fund flows turned negative, said State Bank of Pakistan (SBP). Foreign investment totalled $1.46 billion in the same period last fiscal year.
Foreign direct investment fell 48.2 per cent to $599.1 million in the July-March period and portfolio investment turned negative by $83.1 million
According to a report by the World Bank, the investment climate in Pakistan is badly plagued and contaminated by the widespread corruption.
The foreign investments dropped 100 per cent from $4.23 billion in 2007-08 to $2.22 billion in 2008-09.
According to the statistics issued by the Board of Investment, total foreign investment inflows were around $485 million during 2001-02, while these investments were increased up to $1,524 million in 2004-05.
Surprisingly, Pakistan witnessed a massive boom in foreign investments that crossed the amount of $3,521 million during 2005-06.
Unfortunately, since the arrival of a democratically elected government, we saw a rapid decline of foreign investments.
Apart from an unfavourable investment climate, Pakistan has, unfortunately, also been hit by several natural calamities, not to exclude worst energy crisis in the same period, aggravating the existing economic woes.
There are many examples of those of the local and foreign investors, who made massive investments within various industrial and service sectors of the country, but ended up with shifting their entire investments to other countries of the region due to adverse socio-political and bad economic conditions almost in all parts of this country.
Engro Fertiliser is one of the recent examples of dejected investors who have been undergoing plethora of problems and negative issues within the whole industrial sector in Pakistan.
Setting up the world's largest ammonia-urea plant that also happens to be the largest private sector industrial investment ever made in a developing country like Pakistan, Engro Fertiliser faced an acute shortage of gas supply along with many other prevailing socioeconomic miseries, affecting the entire production of its mega plants, let alone its pre-scheduled business expansion programmes in other business and industrial sectors of the country.
Similarly, having its business operations in many countries of the world, a multinational Irish duty-free outlet, which came into Pakistan with a huge foreign investment, had to bite the dust owing to totally unfavourable market conditions.
Majority of reputed international airlines stopped landing on the Pakistani soil due to unrealistically elevated landing and fuelling charges taken by the local airport authorities here in Pakistan.
A globally-acclaimed China-based auto-manufacturer which came in Pakistan with a plan to invest $42 billion by setting up a car manufacturing plant at Karachi also bore up with the same scenario.
Roughly estimated to offer employment opportunities to more than 10,000 people of this country, the said auto-manufacturer required 100-acre plot of land in order to set up its mega auto manufacturing plant, while 50-acres of that plot was exclusively reserved for setting up a free hospital for the local people living in the nearby poor communities.
A country, which looks to be freely available to encroachers and land mafia, the required land measuring 100-acre was not provided to the investor by the Pakistan authorities. What a pity!
Having invested Rs90 billion, CNG sector is another victim of the same lawlessness. Compulsory weekly curtailment of gas for CNG stations in Sindh and Punjab and increased CNG tariffs are badly affecting this sector.
Another issue that additionally frustrates investors in Pakistan is the government's decision to provide sovereign guarantee to importers against the import of 500 million cubic feet (mmcfd) of LNG per day to tackle recent energy crisis in the country, which is, definitely, against the LNG Policy 2011 under which the government can't provide any sort of sovereign guarantee to the private LNG importers.
This shows government's violation of its own policies.
There is litany of reasons and evidences of declining foreign investments.
In a nutshell, it is, really, an alarming situation, especially for a poor third world country like Pakistan as no local or foreign investor may even think of spending a single penny amidst existing socioeconomic conditions and political and regional insecurities nationwide.