Pakistan needs more foreign investment and visitors
Waqar Mustafa
Pakistan is busy welcoming global celebrities this season. Princess Beatrice of York, a member of the British royal family, and Jose Maria Aznar, former prime minister of Spain, and Matteo Renzi, former Italian prime minister, are here for a ski trip. Princess Beatrice’s visit comes four months after Britain’s Duke and Duchess of Cambridge, Prince William and Kate Middleton, visited the country for a five-day tour.
Captained by Sri Lanka great Kumar Sangakkara, England’s venerable Marylebone Cricket Club is also here for four games in Lahore. Pakistan has hosted Sri Lanka and Bangladesh cricket teams recently, restoring its reputation as a safe destination for visiting teams. Sangakkara, one of the world’s best batsmen of the past two decades, said: “I am happy that we are able to play our part to try and encourage countries to look at Pakistan as one of the best cricket destinations. It has been in the past and I am sure it will be that again very soon.”
Optimism about Pakistan’s future has other buyers as well. Helping the 208-million-people country wrestle with a balance-of-payments crisis, the International Monetary Fund last week said Pakistan was making progress on economic reforms. The IMF said the country’s revenue growth from tax had been “strong” as the government had recorded a primary surplus of 0.7% of its gross domestic product. “Economic activity has stabilised and remains on the path of gradual recovery. The current account deficit has declined, helped by the real exchange rate that is now broadly in line with fundamentals, while international reserves continue to rebuild at a pace considerably faster than anticipated. Inflation should start to see a declining trend as the pass-through of exchange rate depreciation has been absorbed and supply-side constraints appear to be temporary.”
A biannual study, the Perception and Investment Survey 2019, conducted by the Overseas Investors Chamber of Commerce and Industry (OICCI) during the last quarter of 2019 among the leading foreign investors of the country is also upbeat about Pakistan’s future growth potential. OICCI President Shazad Dada said 75pc of the respondents indicated willingness to recommend new Foreign Direct Investment (FDI) in Pakistan to their parent companies for “the government was engaged with stakeholders on policy issues”.
Investors, however, are concerned at poor progress on documentation of economy, high interest rates, devaluation, overdue tax refunds and the energy sector’s circular debt. A number of companies in the fast moving consumer goods (FMCG), food and healthcare sectors identified counterfeiting, illegal imports and dumping of cheaper imported products as major risks to their businesses.
Pakistan is one of the Next Eleven countries identified by British economist Jim O’Neill in a research paper as having a high potential of becoming among the world’s largest economies in the 21st century. With an economy that is now the 24th largest in the world in terms of purchasing power parity (PPP), and 42nd largest in terms of nominal gross domestic product, it needs to plug these gaps to tap into the potential that local and foreign investors see in the country. Pakistan’s undocumented economy is estimated to be 36 per cent of its economy. And so, more than a third is out of the country’s kitty. Although documentation is politically risky, it is economically a game-changer. Other issues of concern for investors require policies and their strict implementation.
Educating and training the young working-age population to build a quality workforce and investing in research and development can lead to the development of new products and services driving growth, creating jobs, and improving national welfare.
Gifted with an ideal geopolitical location, the country needs to ensure socio-political stability and a fair and attractive business atmosphere for both domestic and international investors by improving the legal framework for protecting the rights of investors and refining institutions related to business and investment. In collaboration with the World Bank, the government is preparing a stakeholders engagement plan for Pakistan Goes Global (PGG), focusing on investments for creating an enabling environment for exports investing in strategic coordination of government agencies and evidence based policymaking, automation, export promotion, and building exporters’ capabilities.
In its meeting with a parliamentary panel during the recent review, the IMF has proposed that Pakistan open up its economy to the rest of the world by lowering restrictions on imports and signing new free trade agreements (FTAs).
Open up to bunch up. Besides people, it is the inflow of money that Pakistan needs.