Foreign investment: Pakistan, a hard sell for investment chief

Key to winning the confidence of investors is innovation: Mandviwalla.

ISLAMABAD:

Saleem Mandviwalla has one of the toughest jobs in Pakistan.  The investment board chairman is charged with persuading foreign companies to pump money into a country marred by suicide bombings, rampant corruption, an inept government and power cuts that cripple industries.

Revelations that Osama bin Laden apparently spent years in Pakistan further tarnished the nuclear-armed nation’s image and made Mandviwalla’s mission even more daunting.

That was painfully clear when Prime Minister Yousaf Raza Gilani paid his first official visit to France a day after the al Qaeda chief was killed in a town close to Islamabad on May 2.

Gilani sought to persuade French business leaders considering investment in Pakistan that the South Asian nation’s security risks were exaggerated.

It was a tricky sell.”When he went to France all they wanted to discuss was Osama,” said Mandviwalla.

Pakistan, heavily dependent on foreign aid and an International Monetary fund rescue package, is desperate for foreign investment to improve its battered economy.

Foreign direct investment fell 28.6 per cent in the first ten months of the 2010-11 fiscal year to $1.2 billion from $1.7 billion in the same period last year.

Despite several army offensives, suicide bombings by al Qaeda-linked Taliban insurgents are seemingly carried out at will, making headlines around the world and putting off investors who opt for safer emerging markets.

Mandviwalla believes the country is bringing in nowhere near enough foreign investment. “We could have done roughly $6 billion in the last two years. We did about half of it,” he said.

“Terrorism affects investment immediately, not in years. If one bomb goes off in your country, investment of millions of dollars flies away.”

When Mandviwalla is not abroad hoping to court companies with the financial muscle to help Pakistan, he works from his slick office which was once home to a U.S. embassy visa section. He thinks Pakistan’s information technology sector in particular has a lot to offer.

But even hosting conferences to promote Pakistan presents problems. For one, many countries have issued travel advisories. “Big companies do not take risks because there are chances that their employees could be kidnapped or killed so they choose to have meetings somewhere else,” said Mandviwalla.

“They (foreign companies) say ‘you can hold meetings in Dubai or Bangkok or London or Singapore or elsewhere’ but not in Pakistan. If a person cannot come to Pakistan what investment can he bring to Pakistan. It’s a very big issue.”

Last month, the IMF postponed talks with Pakistan over security concerns and then moved them to Dubai. Some think it’s worth the risk and see opportunities.

“We are providing protection. I would say we are over protecting them. We are going out of our way. Half of the police are engaged in protection jobs. It’s taxing the government in a big way,” said Mandviwalla.

Security fears are not the only obstacle to investment. Paralysing red tape and the impression that the government lacks the political will to carry out unpopular IMF reforms which could help the economy, also make foreigners hesitate. “So far no government has dared to introduce reforms ... That creates a hindrance to investment,” said Mandviwalla.

In the meantime, he says, the key to winning the confidence of investors is innovation and a greater sense of urgency. “We need to speed-up our process. We need to overcome our bureaucracy and bring in investors across the board with incentives,” he said.

“For example if somebody comes here who I want to establish a refinery, you have to fulfill his requirements within a week or two instead of six months.”

The United States is the biggest investor in Pakistan, followed by Britain, the United Arab Emirates and Japan.  There are signs things could improve. For instance, Russian companies will provide $540 million for Pakistan to expand its steel mills, he said.

But much more needs to be done to bring in cash. “If we continue to deal with investment with (our) conventional methods we may go back to a position where we were a decade ago,” said Mandviwalla.

Published in The Express Tribune, June 9^th, 2011.