FDI in Pakistan not up to mark despite govt efforts

ISLAMABAD: The vigorous steps being taken by the government of Pakistan to ensure a conducive business environment in the country have so far failed to attract the desired volume of foreign investment, WealthPK reports.
According to the data of the State Bank of Pakistan, foreign investment in the country was recorded at $1.78 billion in the first quarter of the current fiscal compared to $4.58 billion in the corresponding period of the previous financial year.
The data showed that the total foreign investment in the country in the current fiscal so far was $314.5 million compared to $487.8 million in the same period of the previous financial year.
Saddam Hussein, a research economist at the Pakistan Institute of Development Economics, told WealthPK that the country was facing challenges in attracting foreign investment. He said that the government was struggling hard to attract foreign investment.
“The country now has a chaotic policy framework due to the International Monetary Fund programme, its interventions, the Covid-19 pandemic and devastation caused by the recent floods. Macroeconomic stability is still a long way off, and the government must continue to work to win back the trust of local and foreign investors and financial institutions,” he said.
Saddam Hussein said that investment might come from any source. “In fact, international investors are drawn to a country when domestic investors are racing to make investments there. Unfortunately, foreign direct investment in the country has been fairly low as it is less than 4% of the Gross Domestic Product. Local investment and foreign direct investment are important for the development of every country,” he added.
Low domestic investment in Pakistan can be attributed to a lack of company growth, poor retail, a fragile stock market, ineffective stability and unsupported construction activities. These issues are a result of a self-centred or reactive policy. Foreign investment cannot be attracted without thriving domestic businesses under mercantilism.
The research economist said the issues related to taxes caused a lack of trust among businessmen and traders in government policies. He said that the public deficit made the policies more volatile. “Cities like Karachi, Lahore, Faisalabad and Sialkot are the main industrial centres that can provide investment opportunities,” he added.
He said that frequent changes in taxes and a lack of trust in government policies kept the country at low investment levels as it was unable to attract foreign investment. “Pakistan has also lost its advantage in international trade by continuing to depend on low-tech products. Private sector players have adapted themselves to the new realities of global markets. Favourable trade, investment and openness in the policies can contribute to the growth of dynamics,” he said.
Muhammad Safdar Kazi, the chief executive officer of Fair Edge Securities, told WealthPK that the current political situation was keeping away investors from the country. “Political and economic stability is essential for greater international and domestic investment. No investor will be willing to invest in a politically or economically unstable country,” he added.