Its most unfortunate that all those who have been in power for the longest time in the country’s history have been unable to spur growth in foreign investment. The decline in investment was significantly felt when the dollars coming in 2000s stopped. Even the devolution of powers under the 18thAmendment, the consequent Special Economic Zone Act almost a decade ago, and then the CPEC in 2015-16 (that also promised to conceptualize SEZs) remained insufficient for foreign investment in the country and could not take FDI to levels that could address the economic challenges that the country faced. Though CPEC did increase FDI in the country from China and in the power sector mostly, the lack of diversification, lost focus on other areas and sources for investment and the failure of CPEC for moving onto the second phase with SEZ and technology transfer eventually resulted in weakening flows from China. All this while, the structural challenges remain unaddressed where the ease of doing business, taxation, regulatory hurdles and policies continue to shove investors away.
The recent attempt at reviving the economy and addressing the foreign investment challenges amid the ongoing political, security and economic crisis has been the establishment of the Special Investment Facilitation Council (SIFC) to overcome the bureaucratic hurdles and red tape to facilitate and facilitate the foreign investment. In all honestly, the SIFC formed in June 2023 has not been able to move the needle. FDI in 4MFY24 stood at $524 million and no vivid improvement in the country’s FDI has been witnessed.
In a recent analysis by PRIME, the think tank highlights that the ability of SIFC in boosting FDI must be reviewed. In its October edition titled, “A quarterly report with special section on Special Investment Facilitation Council (SIFC)”, the think tank has put forward a few lacunas that raise questions on SIFC’s efficacy. For one, it rightly points out that the SIFC ignores the structural challenges the country faces and is the rehashed version of BOI that has failed to promote Pakistan as a destination conducive for investment and bringing in FDI. Moreover, structural challenges like taxation, excessive government regulations, bureaucratic hurdles, and governance remain unaddressed completely. Frequent changes in policies like administrative controls, exchange rate, tariffs, and taxes continue to create uncertainty in the economic environment.
The report also points to the short-term approach of SIFC and its exclusion of the local business community hindering efficient policy formulation but also failing to address the policy and regulatory barriers. And finally, it is also noted that the establishment of SIFC goes against restoring the trust in political government as the involvement of the military in economic decision-making that the governments have completely ignored the institutional reforms.