You know the extent to which donors have hijacked policy agenda when the first fold of Board of Investments’ website boasts how the World Bank has ranked Pakistan among top 20 performers in its ease of doing business rankings. Other than that prized announcement, the BOI has nothing to show for its performance.
In most developed and emerging economies, national and sub-national investment promotion agencies (IPA), such as the BOI, have targets set around the number of greenfield FDI projects and companies they attract, the job created by those investments, and lately the quality of those investments.
In Pakistan, such specific targets are not set, making it difficult to assess BOI’s performance. As a result, the kind of things the BOI has to show for fancy pictures and information nuggets on ‘Pakistan’s potential’ in various sectors, as well government’s plans on special economic zones without even sharing the progress report of SEZs against the promised timelines. Clearly, the BOI is as ‘naya’ or as ‘old’ as it ever was.
If PM Khan really wants a merit-based system of governance, then he will need to start focus on measurements aspect of it. At the one end, this government isn’t focusing on fixing Pakistan Bureau of Statistics as a strong autonomous institution, and at the other end, organisations like the BOI don’t have explicit key performance indicators relating to greenfield FDI inflows. There have been of course FDI targets set by investment policy, but those goals are consistently missed, and no one is held accountable. (See Missed FDI goals, June 22, 2018)
It is quite understandable that FDI flows are not as simple as opening the tap. It often takes several years before an expression of interest turns into FDI announcement, and another 1-2 years before that announcement translates into actual dollar inflows which too are staggered over time. This is exactly why the BOI ought to start maintaining such datasets and making it public for better accountability of the organisation.
What is also important, and this is where the central bank ought to play a role, is to classify actual monthly FDI gross and net inflow into greenfield and brownfield transactions. Dubai’s IPA systematically tracks and publishes data on greenfield, merger and acquisitions, as well as ‘new forms of investment’ which are “non-equity modes of investment whereby a new investment project is 100 percent owned by a domestic firm but is established in partnership with a foreign owned company which has a high level of management control and contribution to new venture”. To expect the same kind of efforts from the BOI would be too much; besides the central bank is the producer and custodian of such flow data.
The State Bank of Pakistan should also learn from the US whose FDI data reporting comes with classification of actual FDI flows by M&A versus greenfield FDI and new investment versus expansions. This kind of data is important to analyse the annual movements in gross and net FDI flows in terms of whether it reflects M&A activity, or new market demand driven greenfield investments or whether it reflects fundamental changes in location competitiveness.
The last point also warrants attention. Following best practices of select developed countries, the SBP or the BOI should also start reporting province wise, if not city wise, FDI data. This can help public and private sector planners to timely and better design urban/peri-urban areas in light of the requirements for both citizens and industries/businesses – be in the context of transport, health & education, or supply chain needs of business/industry clusters. (Read also Wanted: drivers for cities as engines of growth, Oct 15, 2019).