EDITORIAL: Given the government’s desperation to find innovative ways of stimulating the economy, it should latch on to the proposal floated by the Overseas Investors’ Chamber of Commerce and Industry (OICCI) – to set up an overseas investors task force in collaboration with its office to attract private sector-led foreign investment.
The chamber does represent more than 200 multinational companies operating in the country, and has the reach in international financial markets as well as experience with multinational players that will be crucial to lure foreign investment into a very volatile local market.
It’s significant that this proposal follows the establishment of the military-led SIFC (Special Investment Facilitation Council), which puts the power of the establishment behind the government’s new no-nonsense approach to FDI (foreign direct investment). Already the market is abuzz with hope of significant investment from a few Gulf countries.
Yet, for all its benefits, SIFC still lacks concrete private sector representation, duly pointed out by OICCI in its letter to the caretaker prime minister, along with a roadmap for the proposed task force to provide ‘advice and best practices on streamlining regulatory processes, enabling ease of doing business, enhancing investor protection, highlighting investment incentives, promoting human capital development and becoming global ambassadors for Pakistan’s investment opportunities’.
While in some ways OICCI’s ambitions seem just as inflated as the government’s expectation of attracting $50 billion from two countries in five years, it still makes a very important point.
Government-to-government contracts, though welcome and badly needed, can only go so far. And if Pakistan’s economy is going to make an FDI-centric turnaround, it is private sector participation from outside markets that will have to be the game changer.
That’s where OICCI’s involvement will prove crucial. For, it’s not just the economy’s chronically bad health that turns foreign investment away as it is also the criminally cumbersome and broken-down administrative system, laced with needless bureaucratic red tape, that keeps serious money at arm’s length.
Pakistan’s market is a very hard sell at this point, and all initiatives risk running out of steam if the local private sector is not front and centre in the effort. It’s encouraging that the currency market has started stabilising, even if the ongoing correction is sentiment-driven and will need a serious follow-up to sustain.
The government seems sincere enough, and the establishment has promised to help it every step of the way. So far it has made the rupee find its footing again, sharply cutting the interbank-open market spread. Everybody knows, of course, how crucial money market stability is for attracting any sort of investment.
The next step is to involve the private sector to address concerns and remove doubts of serious foreign investors. Then we can get to bolstering foreign exchange reserves. So far, Pakistani financial authorities have been somewhat guilty of concentrating on only two components of the current account – revenue and remittances.
They’ve never given foreign investment the place it deserves, most likely because it’s never really delivered a meaningful quantum. It says a lot that total FDI into the country in FY2022-23 was just $1.45 billion.
Improving FDI inflow is crucial for the economy. Yet with all the political uncertainty, economic contraction and now a renewed security threat, it’s not going to be easy, to say the least. That is precisely why the country needs to employ all forces at its disposal. And right now, the private sector is as good a vehicle as any.
Copyright Business Recorder, 2023
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