Pakistan’s security agencies are not giving clearance to 184 foreign business executives, forcing the investors to look elsewhere at a time when investment has already plunged to the lowest level in the country’s history.
In an interview with The Express Tribune, Board of Investment Chairman Saleem Mandviwalla revealed that despite repeated reminders to the intelligence agencies, currently about 184 applications were awaiting clearance. The applicants were mainly from the United States, Europe, China and South Korea.
“We are in constant communication with security agencies, insisting that this is a matter of grave concern as investors are shying away,” said Mandviwalla, who also enjoys the status of minister of state.
He argued that these were not critical issues for the agencies, so they feel this was not something important. “People don’t seem to understand this subject. They have other more serious issues to deal with.”
After getting clearance from the security agencies, the BOI registers foreign executives and gives them green signal to come to Pakistan. The investment board has also raised the issue with Prime Minister Raja Pervez Ashraf, seeking his intervention.
Foreign direct investment (FDI) in Pakistan has been constantly on the decline, dipping to a mere $756 million from July to May of previous fiscal year 2011-12.
Overall investment has plunged to 12.5% of gross domestic product (GDP) during the year, the lowest ever in the country’s history. When the PPP government came to power, total investment was 22.1% of GDP, the second highest.
On the one hand, the investors have to wait for security clearance for months while on the other a handicapped BOI has little or virtually no autonomy to attract fresh investment due to strong influence of lobbies in the Ministries of Finance, Commerce and Industries as well as the Federal Board of Revenue, said Mandviwalla.
He said the BOI was not fully empowered to fetch investment. “We have to be empowered to give investors whatever they need and this requires change in rules of business.”
He said the BOI must have powers to send summaries directly to the Economic Coordination Committee (ECC) of the cabinet instead of going through economic ministries.
“I have requested the PM that if you don’t want to empower the BOI, please close it,” said Mandviwalla.
For the last two years, he was trying to bring Japan’s motorcycle manufacturer Yamaha to Pakistan. However, he said, the strong lobby of the automobile industry has used its influence over the secretaries of finance, commerce and industries, who have in return paralysed the BOI.
He pointed out that for the last 20 years there was not a single new investment in the automobile industry and even BOI officials were part of this mafia.
Highlighting another important issue that is blocking investment, Mandviwalla said investment companies that come under administrative control of the finance ministry were unlawfully investing in stock markets and providing short-term finances. These companies were created to invest in projects. “BOI wants to stop this illegal practice and I have written to the finance ministry,” he said.
He dispelled the impression that majority of overseas investors in Pakistan have repatriated their profits. Instead, he said, majority of them have reinvested in Pakistan. Last year, more than $1 billion was reinvested.
They not only reinvested the profits but also brought new investment. But this amount is in rupees and does not come through the banking channel, thus, not counted in the FDI, he pointed out.
In the telecom sector, he said, full repatriation was going on. Pakistan, for a foreign investor, is not a repatriating country. It is a strategic location and majority of foreign investors are expanding their businesses.
Published in The Express Tribune, July 7th, 2012.