Need to channel FDI in infrastructural sector

With FDI inflows more than halved during the first five months of current fiscal year, it has now become pertinent for the government to come up with a rational investment policy that will not only increase the volume of FDI inflows but also channel funds towards cash-starved sectors crucial for economic growth.
To no ones surprise, global slowdown is to be blamed at one end, which is expected to shrink FDI inflows worldwide by 30 percent this year according to UNCTAD, but at the other, it is domestic political uncertainty and poor security situation evident from various risk ratings, which are keeping investors at bay.
But the latest data also points to more long-term worries, as investment in infrastructure sector - a prerequisite for growth and development of the manufacturing industry - remained sluggish, with inflows in mining and oil & gas exploration falling by 48 percent and 24 percent respectively in the July-Nov period year-on-year.
Energy crisis, due to load shedding and escalating tariff, is one of the biggest concerns for business. Yet while foreign investment in power sector grew by 28 percent over the period, woefully, all investments were channeled to thermal sector instead of the much-needed low cost hydel power segment.
With inflows in the biggest FDI recipient sectors, financial and telecom, easing on account of gradual saturation, the country needs to put focus on attracting investments in the infrastructural sector, especially considering that Pakistans ranking in the Infrastructure Competitiveness Index is very low - 89 out of 133 countries, according to the World Economic Forum.
So while at one end the government needs to lure investors in the untapped services sectors such as construction, trade, transportation, tourism and medical tourism, it also needs to attract more investment in low cost energy sector such as hydel and renewable energy.
And if fragile law and order conditions in the oil and minerals rich province of Balochistan is keeping investors on the sidelines, then at least explore avenues, such as the coal reserves of Sindh, on a fast track basis.
In addition, considerable investment is also required in the manufacturing sector, especially related to agriculture, such as processed food, dairy and Halal industry, which have the potential to grow and can earn huge export revenues, considering that Pakistans agricultural exports, according to the World Trade Organisation, accounts for just 13 percent of its total export.
Lastly, the investment policy needs to focus on investors from the countries that fared relatively better in the global financial crises - such as select European economies and some of those from the Arab peninsula. Lets get those commercial attachés at the embassies in action.