As Pakistan gears up for economic challenges, there are key lessons

Country needs to make investment opportunities more lucrative for locals

KARACHI: Pakistan faces multiple challenges when it comes to maintaining sustainable economic growth. The previous government may have celebrated in achieving a 13-year high growth rate, but it is likely to slow down this fiscal year, pointing towards fundamental issues within the economy that hinder longer periods of boom.

One of the biggest challenges would be to attract foreign investment in a world rife with trade wars, tariffs, and sanctions. While the government has China to count on as a contributor, stakeholders believe it is time that locals are also encouraged to pour money in the economy.

Textile tycoon and business leader Jawed Bilwani said the government has been incentivising foreign direct investment (FDI) in Pakistan, but local money has been moving out of the country.

“Our government should first try to stop wealth moving out of the country. All these offshores companies are proof of it,” he said.

He said Pakistan’s current account was dependent on remittances, which is also not a good sign for the economy.

Pakistan attracted a paltry total of $2.67 billion as FDI in fiscal year 2018 when the current account deficit stood at $18 billion.



“All local business persons and entities want an equal opportunity and clarity on what is happening when it comes to the China-Pakistan Economic Corridor (CPEC). We want to participate and if Pakistan wants to derive benefits from CPEC, then people should have access to information — only then will entrepreneurs be able to decide,” Mufassar Atta Malik, the Karachi Chamber of Commerce and Industry (KCCI) president, said.

He said his assessment suggested that mainly the Chinese government-owned companies are involved in CPEC activities.

“If one doesn’t know what the opportunities are because of lack of information, how can anyone invest?” he questioned.

“There has to be a good mix of FDI and local investment, and it’s simple – the government should give a level playing field to everyone. Both FDI and local investment enhance competition as when both increase, there’s more scope for entrepreneurs to operate,” he said.

Pakistan’s renowned economist Kaiser Bengali said the country’s government after floating tenders, which Chinese companies won, further let them bargain and allowed further concessions and exemptions, which is a very bad practice.

“If the exemptions were incorporated when the tender was floated, others would have also proposed similar or even better deals for the project. The government is reported to have gone out of the way towards the Chinese,” Bengali said.

He further said that the provision for making it mandatory for Chinese companies or individuals to have a local partner for venturing into Pakistan, like it happens in the Middle East, wouldn’t bear any results.



“Even if it is made mandatory that Chinese companies or individuals must have a local partner, it would also be of no use. People who have no experience of doing business but have good links within the government ranks will become local or resident partners,” he said.

Bengali said he has come to know from his sources from many Pakistan business houses that they have faced stiff resistance while dealing with Chinese companies coming in Pakistan post CPEC launch. “I have been told that by many business houses here that Chinese companies, gearing up to come here, have a ‘take it or leave it’ attitude and they are not prepared to bargain,” he said.

He further said that China was only making investments in the power sector, where government has ensured a high rate of return.

However, Malik said that local investors would be assessing how the new government tackles these challenges in the next 100 days.

“Hundred days are not enough to do anything but it would give signs of how the new setup is leading the country and the style of its governance. If the government is able to produce good results, then not only will local investors spring into action, but Pakistan would also attract FDI,” he said.

According to Malik, local and potential foreign investors have adopted a wait-and-see stance at the moment.

The writer is a staff correspondent

 

Published in The Express Tribune, August 20^th, 2018.

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