Where is $100 billion investment?
The writer is a senior political economist
Economic policies in Pakistan have never really been geared towards earning dollars through exports. Nor was there any concerted focus on saving the greenback through an import substitution strategy. The attempt always was to seek “unearned” dollars by serving the strategic interests of others. It was successful in the 1960s, 1980s and 2000s. Since then, the inflow of easy dollars has stopped. The country has been contracting short term debt to pay for long term obligations of a consumption oriented economy. This has resulted into unsustainable debt accumulation and unbearable levels of interest payments. On this bleak horizon emerged, on 20 June 2023, the Special Investment Facilitation Council (SIFC). It was the initiative of the army chief, whose close interactions with the Gulf states brought home the point that investment rather than cash transfers would mark a relational shift. A precondition was the creation of a real one-window to fast-track clearances and execution of investment in defence production, agriculture, mining, information technology and energy. In the budget month, the coalition government busy satisfying the IMF, allies and electables took leave to celebrate the surprise. From $25-100 billion, all kinds of numbers were floated for the expected inflows. Typical of our superlative tendency, game changer and a project larger than the CPEC became the refrain. Shehbaz speed raised an institutional framework in no time. Legal space was created for the uninterrupted continuation of SIFC during the caretaker set-up and beyond. Most commentators, including this one, welcomed the development as a positive step towards overcoming the extreme uncertainty undermining the economy.
With the hundred days of the setting up of the apex body approaching next week, the key pursuit of chasing the dollar continues, albeit differently. The state power concentrated in the SIFC has been deployed to the maximum to demonstrate zero tolerance for smuggling and other informal and underground activities. Under-invoicing of exports and over-invoicing of imports is being checked. Direct smuggling of dollars to Afghanistan and the misuse of transit trade are under the radar. Trucks hiding bags full of dollars and the basements functioning as lockers are being raided daily. Unregistered money changers have been arrested and the registered exchange companies forced to behave. A major step towards formalising the foreign exchange market is to push banks into opening their own exchange companies. The final end of the hundi/hawala culture, they say, is in sight. As reinforcement, the State Bank and Ministry of Finance have joined hands to announce fresh incentives for the overseas remitters. In addition to currency smuggling, crackdowns on smuggling of petrol from Iran, hoarding of sugar and wheat, and theft of electricity and gas are also in full swing.
The gap between interbank and the market rates is now within reasonable limits. The rupee is regaining some respect. Also, a minister has been appointed to accelerate privatisation. So far so good. Wasn’t, though, the main objective of SIFC to bring in dollars through FDI? All of the administrative measures will make a onetime addition of no consequence. Whatever happened to the inflow of a hundred billion dollars in investment. Is the past repeating itself? Remember Ishaq Dar’s revelation in the Parliament in 2014 that Pakistanis had illegally parked $200 billion in the Swiss banks. He promised to bring the money back by signing the agreements ignored by his predecessors. Then there was the one-point agenda of Imran Khan to fix the chores and dakoos to recover the looted wealth of an equal amount.
Campaigns, dear readers, are no substitute for structural reform.
Published in The Express Tribune, September 22nd, 2023.
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