‘Pakistan is desperately thirsting for Foreign Direct Investment’
Pakistan is so desperately thirsting for FDI (Foreign Direct Investment) that the recent visit of a high-level Saudi business delegation, kicking off plans to invest here with so much fanfare, is very welcome news indeed.
It combined with good news about an upcoming IMF (International Monetary Fund) programme to give a further push to the stock market as it brushed off last week’s interest rate disappointment.
Yet this is still only the beginning of a very important process. And, depending on the quantum of the Saudi commitment, the next most important step is directing these investments to the most appropriate, and deserving, sectors and/or industries. No doubt, both sides held exhaustive discussions on the subject before the Saudi business elite travelled here to finalise deals with their Pakistani counterparts.
The energy minister rightly emphasised that “private sectors of both countries should participate in infrastructure development”, and cited “mines and minerals, tourism and agriculture” as potential target areas.
Yet, perhaps the government should give some thought to diverting some investments towards building refineries. Gold mined from Reko Diq, for example, will need to be refined here to judge its quality.
And since we do not have any refineries, while we’re counting on long-term dividends from Reko Diq, surely we need them more urgently than we need more investment in mines. The minister also promised to “do away with redtapism”. He knows how many times the government of Pakistan has made this promise before and never kept it, mainly because he was often in government, so he would also know that all efforts made so far to get the Saudis sprinkling their money here will go waste if it is not honoured this time as well.
One reason it is so difficult to do business in Pakistan is that no government here ever considered FDI an essential part of the current account. And therefore nobody ever bothered to do much to encourage foreign investment.
Instead, they relied on loans and grants to keep the wheel turning; and now, inevitably, the debt is unsustainable and there’s a rush to fetch FDI, but the mechanisms needed for it are still not properly in place. This administration made some tall claims about the economy when it took over after a very controversial election. It seemed to understand that it would have to hit the ground running.
That left it with very little time to make elaborate plans. But it must still have a concrete vision about the kind of economic turnaround that needs to be engineered because the fragility of the economy leaves no room for experimenting.
That makes it even more important to have a very clear idea of where the first chunks of FDI need to be routed to. A lot more must be done to engage not just the business community, where different sectors are bound to push their own interests – but also economic and policy experts to make best use of whatever investments will be made available.
So far, though, we still have no idea about just how much Saudi investment to expect. Speculation in the press, based on comments from this government and the caretaker setup before it, ranges from $5b-$25b. The next few days and weeks should bring more details, along with more clarity about the govt’s vision and a report on how fast it is moving to cut some of that red tape the energy minister referred to.