How to Increase FDI in Pakistan from Countries other than China?

Globalization and integration of industries is taking place all over the world. Security has not only improved in Pakistan, but also our economy is changing rapidly. Rising stock market performance, increase in GDP and controlled inflation rate are the pillars of support of our emerging economy which has showed significant investments in infrastructure and development. KSE 100 point index 2016 is also ranked 5th in the world’s best stock markets. That’s icing on the cake. According to State Bank of Pakistan and a leading news channel, foreign direct investment (FD) inflows rose to $751 million this year from $716 million in the corresponding period of last year. How can we sustain it? How can we increase growth and development from investments coming from all over the world?

I would praise China for fuelling $436 million FDI in our country. Pakistan-China Economic Corridor (CPEC) is said to be a game changer as China will invest $ 46 billion in Pakistan to build railways and pipelines. In return, Pakistan promises to give China a direct access to Indian Ocean through a 3,000 km route. Not to forget, China is doing same in India, Sirilanka, Nepal and Bangladesh. China can easily control Gulf through CPEC.Is China really in love with Pakistan or they want to influence us? Let’s move on before digging into challenges and limitations of CPEC. Let us hope the complete execution of this project which would be highly dependent on the law and order situation in our country

But, is there anything to cheer about? The other side of the coin is that the flooding of foreign investments has not happened yet. There is something which has always acted as a wall to potential investors from all over the world.

It is common knowledge that the war between Pakistan government and militant groups has badly affected our economy. It greatly pains me that our economy has been left to go to wrack and ruin. USA and Saudi Arabia are already withdrawing their investments from our country.

How to make Pakistan destination of Investment in the subcontinent?

Why cannot we attract FDI from countries other than China?

How can Pakistan promise substantial and nominal return in the conducive environment?

v Peace and Stability

Though the frequency of attacks has declined, but terrorism is the only constant in our country. Pakistan is definitely a no-go country when it comes to stability. Security has always been the subject of concern, especially how it effects foreign direct Investment into the country. Pakistan Army and government acknowledge the challenge of security in the country. Lot has been done to bring peace through Pakistan Army’s Zarb-e-Azb operation and government’s National Action plan. Militants have been on run in North Waziristan and Khyber Agency. But, I am not satisfied with what our government is doing. Despite of militants being uprooted in NorthWaziristan, we continuously face the problem of suicide bombing. No doubt, eliminating terrorism is not a simple matter.

There should be a government policy of rewarding those militants who give up and are ready to live a normal life. Government should register all the madrassas specially being opened in FATA, Baluchistan and North Waziristan. Terrorist groups brainwash all the youngsters in these institutions in the name of ALLAH.

We have to undercut engrained extremist ideologies of the terrorist groups, followed by cutting off their financial sources. Technology should be used to track their ongoing network of operating mechanism and suspicious activity.

v Increase the domestic investments

Despite of better law and order situation, foreign exchange reserves of over $20 billion and increase in remittances, domestic investments have not increased. Maintaining the internal and external balance is very important. Power sector needs to be regulated. It is the basic mechanism that drives any commercial activity. Our government should encourage the domestic investors before going to the external investors. In west, there is a proper mechanism which guides you to go into business.

There should be credit facilities where banks should guide and encourage the local businessman. What is government doing for supporting our local industry? If I want to open a software house in Pakistan and I don’t have the know-how of the basic mechanism on how to start a business in Pakistan. Will the government support me through that process? Government should give free advice and support to local investors to start a business. Why cannot we see more and more companies of our exports; Sports, Cotton, Rice, Leather, Spices, Cutlery, defense material, carpets and rugs, Handicrafts etc etc?

v Government Policies

Government should be consistent in offering fiscal incentives to the investors. Positive policy environment can encourage the investors. What are the government policies to protect the local investors? Government should remove the trade barriers and should offer competitive corporate tax rates, R&D incentives to make it an attractive destination for investment. To work on the energy crisis, Pakistan government has already exempted customs-duty and sales-tax on imports of equipment like power panels, and inverters. Like India, Pakistan needs to relax FDI norms in all sectors.

v Create Faster Jobs and Reduce Poverty

In Pakistan there is a workforce of Engineers, Doctors, IT specialists, Accountants, HR people etc etc. Do the MNCs and businesses have the right people with the right skills doing the jobs?

Quality investment in our country is only possible through skilled labor. According to CIA, Unemployment rate in Pakistan is 6.5%. We need to create faster jobs. We have a huge talented human capital and we are not making use of them.

Education has a key role to play here. According to government blueprint 2025, Pakistan has the second highest out of school population in the world and 77 million people are illiterate in our country.

Management training is very important for solving educational employment mismatch. Businesses should really engage and invest in the employees.

How can we build a generation that has necessary skills to improve economy? We need to bring educational reform to create a balance between research and teaching.

Entrepreneurial skills need to be building right from the adolescence. Institutes need to be more industry focused.

Our universities need to create a more hybrid and flexible model for matching the needs of job market with skills of graduates. Face to face and online learning both can create a hybrid model of learning. Schools and universities should focus on continuous excellence, learning and growth of students. Relevance is required between school educations to where the child wants to build the future.

Government should pick the best innovative ideas to support them fully so that ideas don’t fly out of the country.

Improve relations with India

In the World, last year India has replaced China as a top destination for FDIs by attracting 63 billion dollars. Cross border trade is very important for us. Political dialogue can only start the bilateral trade and investment between the two countries.

v Improve Economy

The Privatization, and deregulation of Pakistan Steel Mills (PSM) and Pakistan Airlines ( PIA), has affected the investment in recent past years.

According to Times of India, The privatization of 68 state-owned companies, was a crucial part of the IMF deal and was meant to bring the country’s finances back on track.

Are not we energy starved nation? Do you know 4% of our GDP downfall is because of energy crisis? Energy demand is a lot more than the supply. This energy crisis is the cause of less agricultural productivity, unemployment and ultimately it is affecting all other industries

Shout-out to Engro Corp, owner of Pakistan’s second-biggest fertilizer maker who will use coal from the deposits in the southern Pakistan region Thar. We have not only started importing the gas last year, but also building power plants with the help of Chinese Investment. Pakistan has also requested China to include Bhasha damn in CPEC to produce electricity.

But where is the solar potential of Pakistan? We need skilled workforce and vibrant entrepreneurs who are solar developers and they should be financed by the Government. Solar developers can get technical and financial help by the companies like Orient Energy, Reon and Energy solutions which provide complete resources to help such solar projects.

But, we also need to focus on wind power projects for specially Sindh and Baluchistan

Positive impact of FDI is only possible if Investment is tunneled equally to all sectors of the economy. Investment should go not only in infrastructure, power sector but also to manufacturing, agriculture, capital market, health care system, aviation, broadcasting, pharmaceutical and oil and gas industry.

Tourism Industry needs to curl especially in the areas like Sakardu, Gilgit, kaghan and Naran.

Conclusion

To top it all, in addition Pakistan needs to manufacture own products to strengthen the domestic market which would eventually increase the employment. Being a mango lover, I would recommend bringing mango to the market throughout the year. Full utilization of its production is required to prepare juices, jams, jellies, and nectars. The technological intervention is required to create enough processing facilities.

My question is, why can’t we do what India is doing? Why FDI cannot be pumped in Pakistan more via automatic route and less through the approval of government? Most of the sectors should give automatic approvals to make Pakistan an open economy in the world.

Are you satisfied with what government is doing to solve the issue of terrorism?

Please share your opinion in the comments below