Falling investor confidence

Foreign investors not interested in people of Pakistan, their primary interest is what shareholders want

Despite moderate economic growth projections and the return of some degree of stability in the short and medium term, foreign investment shows no sign of returning to healthy levels. While this would typically be due to lack of confidence in the economy, experts feel the problem is much more specific — investors want to be able to repatriate their profits, which the government is not keen on allowing. In fact, ever since the government banned the repatriation of profits, foreign companies have severely cut investment, often limiting it to financing to support operational costs during the recent period of economic instability.

Foreign investors are not interested in the people of Pakistan, per se. Rather, their primary interest is what their shareholders want — profits — and they will not show interest in Pakistan if they can’t collect those profits. This is why Shell and some other foreign companies closed their Pakistani operations in recent times, and also why the only ones still sending money here are those that stand to lose even more money by closing up shop, or others that can afford to wait it out till the government is forced to withdraw its restrictions. To illustrate this, FY23 saw just $1.45 billion flow in, and the US — the bastion of capitalism — dropped from second to fourth place on the list of top investor countries.

But even if restrictions are eased soon, investors are unlikely to take a leap of faith on Pakistan when several other equally profitable investment opportunities are available elsewhere, and many of those have nowhere near the same risk of being derailed by government interference. And it is not just recent events. The disastrous handling of the privatisation and subsequent other transactions involving K-Electric and Pakistan Telecommunication Company Limited are proof for investors that the bureaucracy and politicians are either too corrupt or too in.

Published in The Express Tribune, July 26^th, 2023.

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