Has China brightened our investment prospects?

December 07, 2012

RECORDER REPORT

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It is indeed good to see that when most of the other countries are fully engaged in only addressing their own economic problems, China is keen to lessen our economic woes by making the right moves. An important recent initiative in this respect was the interest shown by the China Investment Corporation (CIC) to set up a Pakistan-specific investment fund to attract Chinese funds for Pakistani projects.

In a meeting with representatives of business community, bankers and high officials of the government in Karachi on 2nd December, 2012, President of the Corporation, Gao Xiqing, revealed that the CIC may establish a Pakistan-specific "Country Investment Fund" to support Pakistan's economy. The CIC, it may be mentioned, has already established country-specific investment funds for Russia and certain other countries.

In December last year, CIC signed an agreement with Russia to invest nearly $1 billion in "Russian Direct Investment Fund" to finance various projects; out of which $0.50 billion was to be invested by the CIC. In Pakistan too, the Chinese delegation was here to analyse and discover investment opportunities. There is, therefore, a strong possibility of establishing a separate investment fund on the request of President Asif Ali Zardari. Already, Chinese companies are making valuable contribution towards our economy's fundamentals.

Other members of the delegation were also quite forthcoming in expressing positive vibes. The Chief Strategy Officer of the CIC Zhou Yuan, said that his organisation focuses on financial investment with a straight approach to achieve tangible results. "It is our desire to come to reasonable conclusions to contribute to Pakistan's economic reconstruction for the mutual benefit of the two countries," he announced. Huang Qianli of China National Machinery Import and Export Corporation added that Pakistan is a land of opportunity and entrepreneurs who have already invested in the country are doing quite well and have expanded their operations in recent years.

The sentiments expressed by the Chinese delegation would seem to be quite gratifying but, in our view, it would be a mistake to read too much in their remarks and assume that Chinese investment to the country would start flowing in abundance after their visit is over. This is so because though the news of positive feelings has been splashed in the media, the Chinese delegation has not said something concrete or made any firm commitment. Repeated use of "may" in meetings with their Pakistani counterparts was only an expression of desire rather than declaration of a decision. Reading in between the lines, it becomes quite clear that what has been stated by the members of the delegation is meant to show an interest in forging closer business and investment relationship with Pakistan and a possibility, however strong, of establishing a Pakistan-specific investment fund. Obviously, the members of delegation would have to do a lot of homework and take other investors on board before launching such a fund. Also, we should not lose sight of the fact that resources through the CIC, even if made available, would not be enough to make a significant impact on Pakistan's economy and the country would still need huge doses of FDI from other sources to supplement its investment resources. Remarks by a member of Chinese delegation that Pakistan is a land of opportunity and Chinese investors are doing reasonably well in the country is also only indicative of traditionally courteous behaviour. As is well-known, Chinese workers in Pakistan are not safe and some of them have even left for good in the recent past. Chinese investors have also not been very enthusiastic to invest in the country as suggested by their level of investment in Pakistan when compared to other countries. The fact of the matter is that investors in any country have a long list of destinations of investment to choose from and would only be interested in a country where their investment is safe and more rewarding. Unfortunately, however, in Pakistan, some other factors like increasing militancy, acute energy shortages, poor governance and political uncertainty have also come to play a dominant role in keeping investors away and depressing the level of FDI. The persistence of all these negative developments over a fairly long period of time has reduced the amount of foreign investment to a trickle and there is no hope that this trend is going to be reversed anytime soon. Although, China is a friendly country, we could be certain that the words of its visiting delegation, whatever its statements in public, would continue to be hollow or inconsequential if the reality on the ground in Pakistan remains the same.