Washington seeks more time for finalising NCM draft: Signing of BIT between Pakistan, US deferred

RECORDER REPORT

ISLAMABAD: The bilateral investment treaty (BIT) between Pakistan and US, scheduled to be signed this month, has been deferred, as both sides have yet to agree on some Non-Conforming Measures (NCMs).

Chairman of the Board of Investment (BoI) Saleem Mandviwalla confirmed that the BIT signing, which earlier was scheduled to be signed in September on the sidelines of the United Nations General Assembly Session, has been deferred.

Sources said that the US had recently conveyed to Pakistan that more time was needed to further deliberate on the NCM draft.

Last month, a US delegation visited Pakistan to commence the crucial phase of negotiations on NCMs, which were to be made part of the proposed Pakistan-US BIT but due to differences of opinion it could not be finalised.

A BoI official said that NCMs were illustrative lists of all policy and procedural parameters, which an investor needed to know before making investment in Pakistan. The successful conclusion of a bilateral treaty will open the door for a Free Trade Agreement (FTA) between the two countries. Pakistani officials are also expecting that BIT will assist in enhancing trade volume, generate employment and spur business activities between the two countries.

“Bilateral investment treaties are essentially meant to give confidence to the investors that their property and investment will not be expropriated or nationalised, even though no foreign enterprise has ever been nationalised in Pakistan,” said the official.

Under Pakistan’s investment policy, all economic sectors are open to foreign direct investment and 100 percent foreign equity is allowed.

Pakistan became a key US ally in 2001 in its war on terror yet the country has failed to attract sizeable investment from the US or gain easy access to US market. The lack of inflows of FDI was aggravated due to heightened tension with the United States after the Salala incident in November 2011 which killed 24 Pakistani soldiers and in retaliation Pakistan stopped NATO supplies to Afghanistan.  Pakistan’s worsening economic environment has put-off long term investors while analysts said that the deteriorating law and order situation and poor relations with the US and Nato countries continues to be the biggest hurdle for FDI in Pakistan.

According to State Bank of Pakistan estimates, Foreign Direct Investment (FDI) decreased by 50.4 percent, including budgeted privatisation proceeds in 2012-2013 (July) against 2011-2012 (July). However, the share of US investment in total foreign investment in Pakistan is still greater than that of any other country.