Pakistan: a huge market that can’t be ignored

Scores of incentives being offered to attract FDI including tax breaks, simplified process, land grants

LAHORE:

The government of Pakistan has intensified efforts to stimulate foreign direct investment (FDI), with a special focus on enhancing brownfield investments, for the rehabilitation of sick industrial units.

These initiatives are part of a broader strategy aimed at revitalising economic growth, creating jobs and positioning Pakistan as a competitive player in the global market.

“Pakistan is a market of some 225 million people, and it is hard to ignore such a huge market for a longer period of time,” commented Ahmad Subhani, a Middle East-based investor, while talking to The Express Tribune.

The only issue facing international investors in Pakistan is sustainability, both politically and economically.

“In recent years, the country has tumbled a lot in both cases, but now it seems that the government is gaining strength while dealing with political and economic matters, especially its good relations with the International Monetary Fund these days and incentives for international investors are putting the country back on investors’ radar,” he added.

Subhani pointed out that aggressive investment promotion campaigns had been launched in key markets such as China, the Middle East and Europe. These campaigns highlight Pakistan’s strategic location, resource base and a favourable investment climate.

The government has introduced a host of incentives to attract FDI, including tax exemptions, streamlined approval processes, land grants for industrial projects and establishing one-window operations at the Board of Investment (BOI). These measures have been designed to reduce bureaucratic hurdles and create a more investor-friendly environment.

Apart from that, the establishment of SEZs across the country is a key component of the FDI strategy, said a government official. These zones offer state-of-the-art infrastructure, tax holidays and simplified regulatory procedures.

Notable SEZs include the Rashakai Economic Zone and the Allama Iqbal Industrial City, which have already attracted significant foreign investments, he added.

Brownfield investments, which involve the redevelopment of existing industrial sites, are a priority for the government. These investments are seen as a quick and efficient way to boost industrial capacity and employment. Key sectors targeted for brownfield investments include manufacturing, textile and agriculture, the official pointed out.

The energy sector has been a major beneficiary of FDI and brownfield investments. Projects such as the refurbishment of thermal power plants and the expansion of renewable energy capacity have received substantial foreign investment. These projects will add 2,000 megawatts of capacity by 2025, addressing the country’s energy shortages.

Significant investments in upgrading the country’s telecommunication infrastructure, especially fibre optic networks, and investments in modern agricultural techniques and processing facilities are expected to increase agricultural productivity by 20% over the next five years, the official added.

According to economic experts, if ongoing measures of the Shehbaz Sharif-led government gain momentum, the country’s GDP is projected to grow at an average of 5.5% per annum over the next five years. This growth will be driven by enhanced industrial output, technological advancement and improved infrastructure.

“Seeking a big amount of FDI is crucial for any country, but providing incentives and facilitation to overseas Pakistanis for setting up industrial units in Pakistan should also be given priority, as there are thousands of Pakistanis abroad who want to export products from Pakistan to destinations where they are currently settled,” said Sheikh Tahir Imran, an overseas Pakistani investor.

“I am interested in setting up a textile stitching unit in Pakistan and then export such products to the US market. Why should I buy from India or Bangladesh, instead I should purchase or ideally set up my own textile industrial unit in Pakistan,” Imran said.

“Just like big investments, the government should also focus on facilitating and revitalising small and medium enterprises, as a large number of overseas Pakistanis are interested in such units; this will create a win-win situation for both the expatriates and the government, thereby marking a new dawn for Pakistan’s economy.”

Published in The Express Tribune, May 21^st, 2024.

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