The way to FDI target

The Chairman of the Board of Investment, Waseem Haqqie, has revealed the government's foreign direct investment (FDI) target for fiscal year 2005-2006 to be $3.5 billion. He added that the government was expecting to collect more than $2 billion from the privatisation process. The two may be related as privatisation proceeds can, technically, be defined as FDI.
One may, however, note that Pakistan's governments have become quite adept at setting targets for FDI - targets that are often too ambitious and do not reflect the ground realities. FDI is a source of finance that all governments, including the governments of rich Western countries, actively seek as a means to increasing national productivity and generating more employment opportunities.
Thus Pakistan has to present an attractive enough market if it is to succeed in attracting foreign investment. It is unfortunate that we have been unable to do so to-date. The reasons lie across the political, security and economic spheres. Politically Pakistan remains at a crossroads.
We have a political system in place that would become unsustainable if the President withdraws from the arena. The Constitution and the frequent amendments to suit individuals in power are yet another indicator to the rest of the world that the system may collapse with the political demise of one individual. In addition, in spite of Pakistan's unwavering support for the global war on terrorism the fact remains that within the country there are serious law and order issues associated with terrorism while Pakistani seminaries remain the prime suspects as training grounds for terrorist attacks as far as away as London.
Added to this are our economic policies that appear geared almost exclusively towards increasing the revenue of the government - an objective that is unchanged since the last decade and a half. While it is true that the present government has not made a blunder like freezing all foreign currency accounts, thereby spreading terror amidst the prospective investors, local and foreign, yet it is equally evident that foreign investors have a low comfort level in terms of Pakistan being a safe place to invest or, indeed, in terms of being able to easily access essential utilities prior to commencing production or an assurance that policies would not change with a change in government.
Nonetheless, it is equally relevant to point out that even though there have been frequent changes in government leadership in the past two decades leading to uncertainty about policies and their continuity particularly among businesses and the private sector, public sector development policies such as those for the social uplift have remained broadly consistent in their focus and priorities, within the financial constraints the governments could not escape. For example, the focus on primary education and first-level health care facilities under Social Action Plan in the early 1990s continues to this day.
Similarly, it is noteworthy that economic policies have not changed significantly in recent decades. Privatisation, decentralisation and governance reforms remain the watchwords for the present government as much as they did during the leadership of Benazir Bhutto and Mian Nawaz Sharif.
This probably accounts for foreign companies already in Pakistan not packing up and leaving. Unfortunately though, these policies do not impact on FDI. Perhaps aware of these shortcomings, Haqqie exhorted the private sector not to always look to the government to provide the right environment. Unfortunately, though, the scale of the problems is much bigger in areas which are beyond the control of the private sector and unless the government addresses the security and political concerns it maybe difficult for the private sector to forge ahead.