The involvement of army in economic reforms under SIFC is a positive factor, but the broader goal should be making Pakistan a competitive player in the global market. This is an opportunity for Pakistan to shine on the world stage and revitalize its economy, but it must be tapped with appropriate planning and a long-term vision.
By Syed Asif Salahuddin
The establishment of the Special Investment Facilitation Council (SIFC) is a milestone in Pakistan’s economic development. This ground-breaking initiative, aimed at attracting foreign investment and boosting economic growth, has garnered nationwide attention. The SIFC is a unique forum that brings together the interests and authority of both the government and the military. It is important to understand how this forum can navigate its responsibilities effectively, build trust with investors, and ensure that the military’s contribution in strengthening economy is compatible with the nation’s democratic values.
The SIFC has a broad mandate, covering a wide range of industries from agriculture and energy to telecommunications and infrastructure. Its ‘single window’ approach especially towards working with the Gulf Cooperation Council (GCC) countries shows that Pakistan is serious about attracting foreign investment.
As per law, the SIFC can summon regulatory bodies and government representatives to discuss and resolve bureaucratic bottlenecks that hinder investment operations. The council can also recommend regulatory relaxations or exemptions, as long as they are aligned with the existing laws. This flexibility could speed up the investment process and make Pakistan more attractive to potential investors.
Corporate farming, an essential component of the SIFC’s agenda, envisages the use of modern technologies and agricultural practices, to achieve import-substitution farming and ensure food security. The involvement of army in this economic development initiative is significant, as it reflects a commitment to raising the confidence and trust of the people in the government’s policies, thereby ensuring their continuity.
The privatization of certain assets, including Pakistan International Airlines (PIA), distribution companies, and Pakistan Steel Mills, is another focal point of the SIFC. While this could help bolster foreign exchange reserves, it raises questions about the terms of sale and the prevention of investor exploitation, which requires the authorities concerned to ensure transparency in the whole process.
While attracting foreign direct investment is in focus, achieving sustained economic development is also of equal importance for which Pakistan must introduce structural reforms that could help strengthen the economy. This requires a commitment to transparency, rules-based policy making, and institution building to enhance trust in the system. A long-term strategy is needed to make Pakistan a manufacturing hub and enable its entrepreneurs and youth to bring in substantial dollars through tech-related exports.
The SIFC’s mission is to expedite investments by Gulf investors through a “whole-of-the-government” approach, providing a one-window solution. Nevertheless, it’s essential to avoid discriminatory policies that could discourage other investors. The country should learn from past mistakes, such as providing generous guaranteed returns to independent power producers, which have adversely affected electricity tariffs and industry competitiveness.
While SIFC is a powerful body for cutting red tape and resolving various investment-related issues, it cannot single-handedly restore the private sector’s confidence or bring about necessary industry reforms. Limiting bureaucracy’s role in policy affairs and involving professionals from the private sector is crucial to economic success.
The recent army-supported crackdown on illegal forex trading and smuggling has resulted in a surplus of up to $900 million in the open market, which has been deposited in banks, according to currency dealers. These administrative measures have produced significant economic benefits, and policy reforms related to Afghan transit and smuggling of Iranian oil have also contributed to saving valuable dollars.
Daily trading volume for exchange companies has increased to $50 million from the previous range of $5-$7 million. Remittances channelled through exchange companies have risen by 10 to 15 percent, with expectations of a 25 percent increase to $2.5 billion in October compared to August. The State Bank of Pakistan (SBP) is now reportedly buying dollars from the interbank market for debt servicing, although the exact figures are not available.
The government’s reduction in imports has significantly decreased the current account deficit, from $17.5 billion to $2.4 billion in FY23. The reforms in the Afghan Transit Agreement are expected to have long-term benefits for Pakistan, as the agreement has been misused by smugglers on both sides of the border.
In conclusion, the establishment of the SIFC signifies a significant step in Pakistan’s economic journey. To ensure its success, the nation must focus on a comprehensive approach to attract investment, introduce structural reforms, and strengthen institutions. The involvement of army in economic reforms under SIFC is a positive factor, but the broader goal should be making Pakistan a competitive player in the global market. This is an opportunity for Pakistan to shine on the world stage and revitalize its economy, but it must be tapped with appropriate planning and a long-term vision.
The writer is President of Independent Policy and Research Centre (IPRC), an Islamabad-based think tank. –INP