Understanding SIFC

The first meeting of the apex committee of the Special Investment Facilitation Council (SIFC) announced last month was held on Wednesday. Its outcome was no more than an elaboration of the statement of intent made earlier. Mercifully, the irresponsibility of declaring SFIC as a bigger game changer than CPEC was not repeated. In setting up the SFIC, the government has admitted that, post IMF, its civilian arm alone cannot reform the archaic economic structure. The failure to develop a consensus on a charter of economy sets a slippery stage for potential investors.

The civilian arm can plan for revival, as it has, by prioritising foreign investment in agriculture, energy, IT, minerals and defence production. It can also try formulating policies. But it stumbles when it comes to predictability, continuity and implementation. Investment facilitation is about stable rules of the game and effective institutional delivery. The SIFC is designed to overcome this failure by the inclusion of military. It will, in the words of the premier, “leverage collective wisdom to kick-start the economy”.

Sick of assisting the state, there are reports that the Gulf states have signalled the creation of special funds for direct investment in case the proposals are not subjected to political footballing and procrastinating bureaucratic processes. The leasing out of some berths at Karachi port is the first step. Rapid privatisation of SOEs will follow, besides new investments in the areas identified. New investment is the key to high and sustained growth. Our rapidly growing economy in the first half of the 1960s lost the confidence of investors after the 1965 war. In 1971, the confidence was further shaken by the Bangladesh crisis. The rate of investment in FY65 was an impressive 21.5% of GDP. It plunged to 17.7% in the following year and crashed to 12.2% in FY72.

There have been ebbs and flows since, but the economy never recovered to pre-1965 levels. In FY23, the investment rate was 13.6% and the target for FY24 is just 15.1%. Coordination failure is the major factor in this steady decline. Investment requires a longer term horizon. How credible is a government thinking big in its last month? Then there will be the interregnum of barely empowered caretakers, electioneering and the resultant political set-up, all feeding into uncertainty.

Obviously, the onus of coordination is left to the military presence. Whatever the government or the state of governance, this linchpin is expected to guarantee that one window remains open and functional. In the matters of Covid-19 and the FATF, AML/CFT, the institution demonstrated its capability to coordinate. In the field of investment, however, the experience was disappointing. The worst example was the CPEC Authority. It may be said that a retired general officer could not possibly exercise the requisite clout. But the fate of the National Development Council that included the serving army chief was no different. What is different now is the question being asked by many. One key fact is known. Economic security is now national security. A crumbling economy has been falling behind the requirements of the security budget.

Net federal receipts are less than the interest payments. All other expenditures, including defence, have to be financed by borrowing. I have no information, but it seems like a logical step for the powers that be to take investment coordination in their own hands. Learning from the experience of the CPEC Authority and National Development Council, the intention is to deploy the full might of the state to remove obstacles to investment. If it requires a longer caretaker set-up, so be it.