DRASTIC FALL IN THE FOREIGN DIRECT INVESTMENT (FDI) IN PAKISTAN
Aug 13 - 19, 2012
Despite repeated warnings by the experts and independent economists to the government to take cognizance of the fast decline of the foreign direct investment (FDI) and take urgent remedial measures, the government has remained totally unconcerned and not even discussed the issue formally in any of its official meetings As a result the FDI came down from $5.4billion in the fiscal year 2007-8 to $812 million in 2011-12---the period in which PPP led government ruled the country. Commenting on the situation , a source in the Board of Investment said on condition of annonimity 'we have expressed our inability to attract investment in Pakistan due to the attitude of unconcern of the ministries concerned and the allied departments'
According to the Board of Investment (BOI) the government has been informed time and again that inconsistent policies are causing major hurdles .for foreign investors . Despite claims of liberal investment policies new entrants are facing problems as the government revises its policies every now and then, particularly by imposing different slabs of taxes and tariffs on different categories aimed at promoting some particular sectors. BOI officials maintain that the cost of doing is still high and it is a big hurdle in luring investment. They site the World Bank report 2012 according to which Pakistan ranked at 1o5 in the world in case of doing business-nine places below its ranking in 2011.
Besides regulatory impediments, the compounding energy crises , unsatisfactory law and order and security conditions and above all rampant corruption in government departments are the main discouraging factors for the foreign investors .What to talk about foreign investors, even the local investors have stopped further investment in the country and many of them are planning to move to other countries. An Iranian trade delegation that visited Pakistan in May last complained that while there existed an un- favourable climate , people in the bureaucracy often sought money in the name of commission due to which trade relations between Pakistan and Iran could not be strengthened significantly.
As a result of these factors , Pakistan which was considered by the foreign investors till the fiscal year 2005-6 is no more on the foreign investors radar. The general impression that Pakistan is no more on the radar of foreign investors was also confirmed by the proceedings of meetings of the Commonwealth Business forum (CBF) held recently at Perth in which neither the Pakistani delegation could make out a good case for their country nor the potential investors showed any interest to find out the prospects.
The CBF provided Pakistan with a rare opportunity to show case itself as a trade and investment destination on such a big platform where more than 1400 business and government leaders from 54 countries participated in sessions which continued for three days . The failure of proper presentation of Pakistan case exposed the ineptness and lack of will of our government and its institutions in pushing the country's economic agenda.
FDI is considered an effective tool to create economies of scale as its linkage effects raise productivity for which the country needs to focus on improving its image abroad which is now considered the biggest impediment in the way of FDI. Pakistan's reputation as the hub of global extremism and terrorism, its inconsistent economic policies, poor governance and rampant corruption-all have contributed to keeping away foreign investment from Pakistan
The problem is compounded by the fact that the incumbent government appears to be least concerned about these damaging developments. There appears to be no drive and no vision amongst the economic managers of the present government to change the perception about Pakistan for the better. The top priority agenda of the incumbent government on which the entire government machinery is focused as to how to protect the illgotten wealth in the form of property and bank deposts in foreign countries of its functionaries mainly of the President Zardari built and deposited in foreign countries. As a result the economy of the country was in such a deplorable conditions as not only commonly perceived but also admitted by the State Bank in its annual report for the year 2011. It said ì the economy of the country is in a deplorable condition and almost all targets fixed for the current financial year (2011-12) are likely to be missed."
Because of the accumulative effects of these factors, Pakistan which, till only 5 years back, was considered as a heaven by the foreign investors is no more on their radar. Pakistan is still located. on the confluence of three vital regions-South Asia, Central Asia and the West Asia offering shortest access to the sea for all land logged countries of Central Asia and Western China. Why the Gwadar Port is still not functional . What the incumbent government has done to make it operational to achieve the objectives for which it was built. The port can benefit Pakistan enormously because of its unique position and explore multiple corridors of cooperation with Central Asia and China particularly in he fields of energy, trade , transportation and tourism. The issue of Gawadar Port has remained totally un-noticed during the last four and a half year tenure of the present PPP led government.