Foreign inflows: Whats keeping them away?

Floundering foreign inflows raise a key question: Does Pakistan offer all that is vital to attract foreign investors? Wake up and smell the coffee! The briefest examinations of the countrys key macroeconomic indicators over the past few years could easily explain flagging foreign investors interest in the country. It is reasonable to ascribe poor investment prospects to anaemic growth rate- a key indicator preventing global investors from fresh investments in the country. To no ones surprise, the countrys average annual GDP growth rate stood at a miserable 3.7 percent during the past five years, nearly half the average growth rate of South Asian region. Above and beyond, when projecting the macroeconomic prospects, one always has a sob story to tell, as the country is forecasted to grow at a slower pace in the region in 2012 and 2013, according to ADB data. In part, the country has taken a severe knock from high inflationary pressures, which is to be blamed for retarding performance of the key cogs of the countrys economic wheel. An average annual inflation rate stood above 12 percent, as opposed to average rate of 7.5 in South Asia, during the past five years is high enough to quell investors fears. Realising that the financiers worst nightmare is decline in value of foreign currency in which it holds investments, significant decline in value of rupee against key global currencies would have compelled investors to cross the countrys name off from the list of top favourable destinations for foreign investments. Going deeper into the analysis of factors pertinent to grease economic engines is also casting a long shadow over future economic health. High budget deficit has placed the country in a quagmire. While poor institutional efficiency is to be partly blamed for almost bringing down foreign investors confidence. Above all, a myopic attitude towards spending on education and infrastructure has put the country at a significant disadvantage compared to other developing countries. Last but not the least; the country also faces intractable problems in the form of poor political and security environment. The countrys overall position on competitiveness scale can also be gauged from its ranking on WEFs Global Competitiveness Index, where the country ranked at 118th place out of 142 countries. Given the current scenario, the country faces a slew of formidable challenges, raising the need to take more drastic steps to address its intractable structural flaws.