EDITORIAL: The fact that Japanese companies are no longer interested in further investments to expand business in Pakistan does not seem to have shocked the government like it should. The world’s third-largest economy, known for its meticulous business and investment practices and a close financial ally of Pakistan, Japanese investors seem to have finally lost patience with Pakistan’s endless political, social and economic problems and decided not to anymore foreign direct investment into this country.
From exchange rate fluctuations and constantly rising procurement costs to political instability and out-of-control energy and other input costs, the Japanese have braved it all for the longest time; and now that their domestic environment is changing after a very long deflationary period – raising rates for the first time since January 2007 – they’d rather chase more secure and higher yielding investments in the region, which is why they are still bullish about Indian and Bangladeshi markets, just as they decide to slowly decouple with Pakistan.
Yet this is just the time when the government should do whatever it can to facilitate, not discourage, foreign investment. And if it’s not much bothered by the unhappiness and possible departure of a heavyweight like Japan, then it is just not serious enough about the present predicament. And, as usual, the people of the land will have to pay, quite literally, for the incompetence of its rulers.
This is hardly a new problem. For years, China has been our number-one foreign investor; that too primarily because of CPEC (China Pakistan Economic Corridor). And even China has started to grow weary of Pakistan’s attitude, especially the high-level response each time the government fails to protect foreign workers from terrorists – who have been at it for years, with the government and security forces always behind the curve.
It’s because of this attitude that FDI does not figure in current account figures or its debate, whereas it ought to be the prime vehicle to attract foreign exchange. Now, Japan’s posture will not only deprive the local market of their activity and investment, it will also send a very bad signal to other investors, who are already suspicious about committing more money to Pakistan in the present environment, threatening a snowball effect just when the country is barely staying above water.
More money in the bank would give the government a little more flexibility when it comes to the “upfront conditions” that will decide the degree of potency of the next IMF bailout programme; most likely another Extended Fund Facility. But that is clearly not an option anymore and the government will just have to accept whatever conditions the Fund sets for its loans.
The government must be asked, once again, just why this news did not raise any red flags in Islamabad. Why hasn’t the relevant ministry tried to calm fears and concerns of Japanese investors. And why is nobody trying to make sure that this trend does not spread like the next pandemic? It’s bad enough that things have got this bad. But it’s much worse that nobody’s doing anything about it even now.
Copyright Business Recorder, 2024