Whats the height of desperation? Pick your answer from the following: The governments plans to raise Rs50 billion by issuing 3G telecom licenses this fiscal year, or the proposed reduction in equity investment to Rs500 million (minimum upfront equity of Rs 100 million) to set up an oil marketing firm from Rs6 billion at present.
Okay, tick both, if you wish. The point is that the government is not making all the wrong moves to woo investors, its just making ill-timed and ill-prioritised moves.
For instance, why would any telecom investor want to get in to third-generation business, when growth in plain voice transfer business is gradually losing pace?
3G may be a great market elsewhere, but given Pakistans demographics and business dynamics, the industry is more concerned about consolidating its gains (possibly through industry consolidation) before it takes on the niche stream. And the industrys lukewarm response to a recent 3G seminar in Islamabad somewhat confirms this notion.
Similarly, the proposed cut in equity investment criteria for OMC from Rs6 billion to Rs500 million is shocking.
While the motivation may be to attract more investors, chances are that investors won be attracted because the OMC market in Pakistan is regulated with not much room for competition.
For a new player, better services and stronger distribution could be the key to gain competitive advantage, but any new player will have to invest a lot of time and money to achieve that - something Pakistans fragile security, and law and order environment doesn necessarily allow.
Then again, knowing that "business policies in Pakistan are often the product of high profile lobbying", according to a senior investment banker, the proposed reduction in investment criteria for OMCs appears too drastic and hence a bit fishy.
Even if its not, these measures are ill-prioritised; surface level changes or price signals like these work when there is the right infrastructure and governance is impeccable. And in Pakistan, both are found wanting.
Take for instance, the Sindh governments lacklustre response to a Czech firm which was interested in investing in Thar coal. Reportedly, Sindh government has been issued a letter citing the firms likely withdrawal from the proposed project.
So, if thats the kind of response investors are going to get, then even a stable currency, lower interest rate and other price signals might not be able to get investors flocking into Pakistan.
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