19 Jan It’s about FDI, stupid
Anyone who is oblivious, callous or uninformed about how crucial Foreign Direct Investment (FDI) is to Pakistan should be awarded the kind of treatment tribals reserve for adulterers. This delicate thing we call FDI has raised many countries from South Korea to Bangladesh out of the pit of abject poverty, injecting fuel into the economy, jobs into the lower middle class and competitiveness into its manufacturing structures. It is not optional. It is like unclogging the drain of tea leaves. Leaving them there chokes the flow of money and, eventually, prosperity.
The tragedy of Pakistan is that those responsible for the unclogging are creating the very conditions that muffle investor confidence: they hold mass protests on the street where the arms of the government operate, they eat of the federal reserve kitty, they beat war drums and, worst of all, they do not think long term. No investor wants to set up shop in an environment of low literacy, a biohazard laboratory or a jihadist factory. No amount of mineral wealth, demographic dividend or investor-friendly policies will bring him/her here if we do not fix the basics. One thing that this dysfunction guarantees is huge amounts of facilitation fees in the operations of the new ventures because the system does not work and the people are greedy. It also guarantees the thing that investors are most averse to: lack of continuity.
According to the Board of Investment, Pakistan has received an approximate $ 20 billion in investment since 2006, but this is laughable for the sixth most populous country in the world with the kinds of things we have going for us: some of the most positive safeguards for investors, a huge English-speaking workforce, the future prospects of the China-Pakistan economic corridor, its agricultural and livestock base in an increasingly scarce global market and, finally, the oft repeated strategic location. According to the Asian Development Bank, Pakistan’s middle class has grown at an astonishing 36.5 percent compared to a mere 12.8 percent in neighbouring India. Still, the urgency of saving those that are falling through the cracks cannot be underscored enough.
What we have done with FDI is what we have done with politics. We have underestimated its worth and not put a concerted effort into being methodical in our efforts to bring change. In the process, we have tainted both. They both feed off each other and, in the end, it becomes a vicious cycle spiralling downwards. The inevitable loss is of the people employed by the factories and service centres.
Thankfully, Pakistan has never been a country that fought off foreign investors; we were among the first to open our markets in Asia right after independence. No foreign investment has ever been nationalised. The vision the founder of Pakistan, Mohammad Ali Jinnah, gave us was one of an open market economy. Addressing the Karachi Chamber of Commerce in 1948, he stressed a private-sector focused economic regime: “(Except a few) all other industrial activity is left open to private enterprise, which would be given every facility a government can give for the establishment and development of industry. Government will seek to create conditions in which industry and trade may develop and prosper.”
What ails Pakistan now, however, is a far more dangerous malady, one where it is imploding and suspicious of anything except what resembles a concept of primitive conservatism, fostering hegemony and territorialism. This is terribly bad for business, especially local business. To attract foreign investors, policies have to first be attractive to Pakistani investors who have, in their frustration, moved operations to countries like the Philippines, Sri Lanka and as far as the US. This money does not just add up to a substantial blow to our FDI, it also is a symbol of our failure as a nation to have managed to chase off those who were already converted to the cause of Pakistan.
The economists at the helm of this domain seem promising but for them to be allowed to show any results there must be a sustained effort towards finding ways to incentivise investors enough so the risks are offset, infrastructure development, particularly of special economic zones (SEZs), and recourse to international arbitration in the case of disputes. There must also be more awareness about those that have made it big here: Nestle, Standard Chartered, Yamaha, Telenor, Metro and many others. Their success can build on more success.
So much of this is like leaving grains in an open green field and waiting peacefully for the birds to come. Peacefully being the operative word.
No Comments