‘Pakistan’s Investment Climate: The Way Forward’

Former BOI chairman terms incompetence as main reason behind economic woes; calls for privatizing public sector enterprises

A significant reason for the economic crisis facing the country currently is incompetence, and under the current circumstances, doing business in Pakistan is no less than jihad. Investors need handholding and assurances, whereas the investment climate in the country lacks both facilitation and consistency.

This was stated by Muhammad Azfar Ahsan, former minister of state and chairman, Board of Investment (BoI), as a keynote speaker at a roundtable titled ‘Pakistan’s Investment Climate: The Way Forward’, which was held at IPS on January 19, 2023.

The session was chaired by Khalid Rahman, chairman, IPS, whereas Ambassador (r) Syed Abrar Hussain, vice chairman, IPS, Syed Tahir Hijazi, former member (governance), Planning Commission, Dr Safdar A. Sohail, former dean, National School of Public Policy, Zafar-ul-Hasan Almas, joint chief economist, Planning Commission of Pakistan, and Dr Shahzad Iqbal Sham, IPS’ senior research fellow, also presented their views on the occasion.

The objective of the session was to explore the current challenges faced by local and foreign investors and the desired economic strategies to overcome the prevailing crises.

Ahsan started his talk with three main issues: lack of vision, lack of political will, and the need for collaboration. “Although I have zero tolerance for corruption, I believe that a significant reason for the economic crisis that we face is incompetence.” He said that under the current circumstances, doing business in Pakistan is no less than jihad.

Elaborating on investment issues, The speaker said that investors need handholding and assurances, as their profits go back into developing the infrastructure in Pakistan, and one success story creates opportunities for others to follow. Similarly, public sector enterprises (PSEs) must be privatized. The PSEs have become a major drain on national resources and the Privatization Commission’s performance is dismal for the lack of expediency and identification of issues.

Extrapolating on Foreign Direct Investment, the economist said that the FDI portfolio was less than US$3 billion, which was not sustainable for a country of over 230 million people. “Our investment climate is challenging for the lack of consistency and facilitation,” he emphasized.

Commenting on the turnover and lack of continuity, he said that he was the fourth BoI chairman and saw the appointment of the sixth FBR chairman and fifth finance secretary during his tenure.

He insisted that Pakistan must focus on six to eight countries as best case studies, to attract investment. He further highlighted that Uzbekistan and Kazakhstan’s investment strategies are excellent model for Pakistan to follow. These economies have shown remarkable development in a short period of time. “We need to create a similar ecosystem in Pakistan with a simultaneous focus on G2G, G2B, and B2B.”

While contemplating China-Pakistan Economic Corridor project, he highlighted CPEC as a great example of FDI and solemnly noted that not much is being done to productively utilize the opportunity. He said that the Chinese government had already established Special Economic Zones (SEZs) in 22 countries; BoI had recommended that that should be the top agenda in our meeting with China’s President Xi.

The Saudi government has funding available for eight priority sectors. Their biggest desire is to engage Pakistan as a food security partner; they want to establish an Agri Zone in Pakistan, in addition to an oil refinery in Balochistan. Unfortunately, the delay has been at our end, as we have failed to deliver ready projects; meanwhile, the KSA is investing aggressively in other countries. The speaker added that during his meeting with KSA’s investment minister, they designed an investment strategy for both countries, based on an opportunity of a few billion dollars per annum. No progress has been made since then, and the state is only focusing on getting bailouts.

Ahsan believed it was wrong to blame any political government, bureaucracy, or army for the reasons of lack of investment. This is shared responsibility and shared failure. “Right now, there is a compulsion to sign an agreement with the IMF, but US$1.1 billion is insignificant if we compare it to the potential of investment that we have to generate on our own. We can bring in FDI of US$6 to 8 billion in three to five years and around US$15 billion in eight to 10 years, given a stable framework of policies that is above any political change.”

Another big concern for investors is the FBR’s function and policies, he said. They feel burdened beyond their feasibility. It has reached a level of exploitation and needs immediate solutions. However, addressing issues this complex, at the national level with an international context we need strong leadership and that is the office of the prime minister only. The prime minister is responsible for resolving bureaucratic hurdles; in the past, none of the premieres were able to do so.

In his concluding remarks Khalid Rahman highlighted that there is no shortcut recovery to these ills, however, numerous opportunities in different sectors must be availed without further ado. The resumption of these opportunities demands reforms in governance, he added.

As governance originates from political government, it is the legal duty of the head of government to pull the country out of adverse circumstances. Likewise, parliamentarians should effectively fulfill their role with regard to the national agenda and public interest. This commitment to duty can only be ensured through fair elections based on proportionate representation of the public vote, he emphasized. The changes brought about by these reforms would eventually lead to consistent policies, national confidence, investors’ trust, the convergence of interests, and better trade relations through good governance.