ARTICLE: The Board of Investment (BoI) last week rolled out an investment promotion strategy for the next three years, setting Foreign Direct Investment (FDI) target of $4 billion for 2020-21, $4.5 billion for 2021-22, and $5 billion for 2022-23. The plan was launched at a seminar organized by the board in collaboration with the World Bank, International Finance Corporation and the Commonwealth office of the United Kingdom.
Moreover, BoI also launched the Sixth Ease of Doing Business Reform Action Plan on the occasion. On the same note, the investment outlook of Overseas Investors Chamber of Commerce and Industry (OICCI) member companies is quite healthy. They expect to invest on average $3 billion a year over the next three years. In addition to their investment, they expect FDI to be of $10 billion in the next three years. All in all, FDI plus investment from existing MNCs will likely remain around $6 billion-7 billion a year in the medium term. The FDI targets announced by BoI are a pleasant departure from the past unrealistic targets set by BoI, which were largely based on growing significance of China Pakistan Economic Corridor (CPEC) and country's strategic location in the region.
The strategy and targets announced for 2020 - 2023 appear challenging; but these are achievable if BoI can manage to put its act together.
The last three years' FDI average in the country is $ 2.2 billion ($2.2 billion in 2019, $1.7 billion in 2018 and $2.7 billion in 2017), whereas, for the next three years (2020 to 2023) it could soar to $4.5 billion per year. BoI has to do something significantly different to double the FDI in view of the fact that in the post-Coronavirus pandemic scenario, economies around the globe will be struggling for survival.
The FDI in the country reached its peak in 2007 touching around $ 9 billion with Gross Domestic Product (GDP) rate at around 8 percent. In those days, Pakistan's economy was the front- runner in the region along with India's and Vietnam's. The FDI then was mainly from the US and Europe and the CPEC was non-existent.
The incumbent government and its policymakers should examine BoI's files and evaluate what was good in that period and what is not so good now. It is however needless to say that in those times BoI was a robust organisation under the direct focus of the Prime Minister and FDI was recognised as the prime mover of economy. Over the years, BoI lost its stature and competence while FDI remained out of focus of last two governments except the influx of IPPs which brought in only a little benefit.
BoI today is by no standard an FDI facilitator; it's more of a regulator. BoI needs massive restructuring and human resource turn-around to restore its image of a meaningful FDI promoter and facilitator.
Considering the CPEC as a prime source of FDI is incorrect. The CPEC is primarily an initiative of infrastructure development where projects are financed by China under a project loan dedicated to project sponsors. However, Special Economic Zones being set up under the CPEC, can be a pull through for FDI if a significant competitive advantage is offered/provided to investors, specially the SMEs that are globally under pressure for cost effective services and solutions. The government needs to move out from its CPEC-centric mode and once again reach out to Investors from the US, Europe, Japan and elsewhere.
The incumbent government has taken some meaningful measures in Ease of Doing Business, although bureaucratic hurdles and culture of NOCs continue to discourage prospective investors. Equally important for every investor is the Cost of Doing business where Pakistan is unfortunately way out of line in offering competitive advantages to Investors. The European investors plausibly view the cost of electricity in Pakistan as an impediment or disadvantage.
In the region, the FDI (2019) in India and Indonesia ranked at $ 50 billion and $ 24.5 billion, respectively. The PTI government is, therefore, required to fully appreciate the criticality of FDI in the overall economic development of the country.
(The writer is a former President, Overseas Investors Chambers of Commerce and Industry)
Copyright Business Recorder, 2020
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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