Protect investors and spur growth
The writer is an entrepreneur and social worker based in Karachi
A conducive investment climate is believed to be the backbone of sustainable economic growth. The private sector, also called the engine of growth, spurs growth through making investments in various projects that creates economic activity, thus jobs. For this to materialise, the government must ensure that investors’ money is well-protected through consistency in its economic policies, ease of doing business and a fully functional regulatory regime. Investment, domestic or foreign, is what Pakistan’s contracting economy needs the most at this difficult juncture.
Pakistan is passing through one of the most challenging times as it just averted a default on foreign debt with the help of IMF which agreed to dole out $3 billion to dollar-hungry country as part of the nine-month Stand-By Arrangement.
Pakistan’s economy is in tatters and contracted 0.3% last year; foreign exchange reserves are shrinking; inflation and interest rate have peaked to a record; and political uncertainty has deepened more than ever before.
It is a good omen that the democratic transition process is smoothly progressing and the caretaker prime minister Anwaar-ul-Haq Kakar has stated that he would focus on reviving the country’s ailing economy. His cabinet members will have the likes of former SBP Governor Dr Shamshad Akhtar as finance minister. Dr Shamshad is an accomplished economist and well acquainted with Pakistan’s socio-economic issues.
The caretakers should first of all give the much-needed confidence to investors. One way of doing this can be a simple public statement that elections would be held on time. A delay in elections would add to the prevailing political uncertainty which is detrimental to investor sentiments. No matter how efficient, a government without people’s mandate cannot be regarded as strong and stable.
The politics of confrontation and agitation that PTI chairman Imran Khan promoted has already polluted investment climate in this economically-troubled country. Political unrest kept distracted the outgoing coalition government which could not pay due attention to issues related to good governance like investor protection, corruption and price control.
Good governance should be a top priority for the caretaker government which should not only enforce the existing corporate laws but also introduce policy reforms that are investors friendly and discourage fraud and money laundering.
Unfortunately, the appointment of top officials in all major national institutions has been based on political considerations and not merit. Consequently, most of the regulators are either dysfunctional or have misplaced priorities, leaving investors and public at large at the mercy of fraudsters and mafias.
Well-illustrated in the concern is Creek Marina project, the multibillion rupees real estate scam in Karachi. Hundreds of small investors have, reportedly, been defrauded by a fake Singaporean developer in connivance with some unscrupulous officials of local banks.
Moreover, the manipulation of exchange rate by certain banks in the recent past has also put a big question mark on the performance of Pakistan’s central bank as a regulator. With investigation lingering as usual, the side effects of market manipulation is badly weighing on masses in the shape of backbreaking inflation. In June, the prices of consumer items surged to 38% for the first time in Pakistan’s history. The rupee also depreciated to record levels against the dollar.
No matter how stringent, a poor execution of regulatory laws will never give the most-needed confidence to investors in Pakistan. That’s why the flow of foreign investment into Pakistan shrank by more than 90% to $427 million in last three years through June.
Investors from the Middle East and China are now keenly looking at the untapped potential of Pakistan’s key investment sectors including energy, infrastructure development, agriculture, information technology and financial services.
It is high time for the government to speedily undertake economic reforms to ensure ease of doing business and a secure and profitable business environment in the dollar-hungry Pakistan.
Published in The Express Tribune, August 22nd, 2023.
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