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If there was any doubt regarding beleaguered investment environment in Pakistan, the FY15 stats should have removed it. As per SBP, net FDI declined by 58 percent year-on-year to $709 million. Gross FDI inflows - which track the fresh investment coming in - also dipped by 20 percent year-on-year to $2.28 billion. Outflows, meanwhile, had precipitated by 37 percent to $1.57 billion.
The paradox is that foreign investors already present in Pakistan have felt relatively more secure during this period. Based on a recent survey - for the period January 2014 to April 2015 - the Overseas Investors Chamber of Commerce and Industry (OICCI) - which is the lobbying platform of nearly 200 foreign companies operating in over a dozen sectors - relayed an improving security perception. (For details, see "Foreign investors see security climate improving," published August 5, 2015 in this paper.)
That surveys detailed publication isn available yet, but OICCI reportedly said that about 74 percent of respondents perceived a decline in security incidents. A similar percentage reported their staff feeling safer in commuting to and from work. About 68 percent reported more technical and professional foreigners visiting Pakistan than before. Just a few board or management meetings were held offshore, it said.
So, it seems that resuscitating the drooping FDI will need much more than an improved security environment. FDIs hard fall lately could be strictly "business" related. While security is a necessary condition, it alone may not be sufficient to do it for foreign investors.
"It seems before committing medium to long term investments, foreign investors would like to see further evidence of improvements in policy implementation, transparency in governance, and sustained stability in the security environment," was how Atif Bajwa, OICCI President responded, to a different newspaper, after the full-year FDI numbers were announced last month.
Irony is that FDI significantly fell when local business sentiment has seemingly been really strong. Reportedly, Bajwa himself noted that "business friendly policies and good commercial prospects" had caused OICCI members to invest $1.5 billion in FY15 from their retained earnings. Moreover, SBP data show that profit repatriation on FDI had surged to $1.3 billion in FY15, a 31 percent yearly jump.
But it has been difficult to bring greenfield investments. That the incumbent government has so far failed in bringing new private-sector investors to the country indicates that it is no easier to do business than was in May 2013. We have regularly heard catch phrases like "from red tape to red carpet" from this governments investment policy mandarins, but two years have passed us by.
The governments bet seems to be that the Chinese armada that is CPEC would also entice other foreign merchants to its shores. Beware though: Chinese government and its private sector can get exemptions from myriad rules and regulations to expedite their projects; whereas foreign private sector wouldn be so lucky, it doesn operate that way and it would demand formal easing in rules and procedures.
There is some merit in the argument that the security situation has only recently improved, so give the government some time to go for another push for foreign investment. Taken, but that shouldn lead to government napping on the needed rebalancing in rules and procedures. Make it easier to do business, and make it happen fast. The committees formed for this process must come up with a framework soon.

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