Beyond Quick-Fixes: Unlocking Pakistan’s True Investment Potential
Pakistan finds itself in a precarious position, grappling with a significant investment crisis. With a dismal investment-to-GDP ratio of just 13.1%, it lags far behind the regional average of over 30%. This isn’t just an economic statistic; it’s a barrier holding back the nation’s future, despite its immense economic potential and abundant business opportunities.
The Illusion of Preferential Treatment
For too long, the approach to resolving this crisis has focused on piecemeal actions and offering incentives to a select few. The belief that capital formation can be revived by doling out regulatory, legislative, and policy concessions to a privileged few, while keeping the playing field uneven for the rest, has proven to be a short-sighted strategy. The Special Investment Facilitation Council (SIFC), created more than two years ago as a special purpose vehicle to cut through red tape and facilitate foreign investment, stands as a stark example.
Despite its broad authority, the SIFC has delivered less than what was hoped. The irony is palpable: even after implicitly acknowledging the limitations of this approach, policymakers seem determined to persist.
A ‘Strategic Shift’ That Needs to Go Deeper
Recently, at a Pakistan Business Council conference, the SIFC’s national coordinator hinted at a ‘strategic shift.’ While this shift includes the welcome acknowledgement that foreign investors will only come when local investors are engaged, the current focus appears to be limited to offering full support to local “sectoral tycoons.”
What’s missing is a firm commitment to the long-standing structural reforms needed to genuinely improve the investment climate for everyone. Low investment isn’t just a number; it weakens productivity, heightens reliance on imported goods, and remains a major driver of Pakistan’s recurring balance-of-payment troubles.
Learning from History and Our Neighbors
Historical data paints a clear picture: a steady decline in both private and public investment in Pakistan. In stark contrast, regional economies have consistently expanded private investment in infrastructure and productivity. While successive governments in Islamabad have relied on consumption-driven growth spurts, they’ve largely ignored the fundamental structural impediments to capital formation. Even Sri Lanka, despite its own economic challenges, boasts a significantly higher investment-to-GDP ratio of nearly 23%.
The Real Deterrents: Why Multinationals Are Leaving
No country can hope to attract sustained investment by selectively offering incentives to compensate for a fundamentally uneven playing field. This includes:
- Policy inconsistency
- Bureaucratic red tape
- Opacity
- Inequitable taxation
- Weak institutions
- Regulatory unpredictability
The recent exit of several multinational corporations from Pakistan underscores this harsh reality. They didn’t leave due to a lack of business opportunities; they left because policy and regulatory obstacles made their operations increasingly unviable.
The Path Forward: True Reform, Equal Opportunity
Unless the government undertakes comprehensive reforms to the investment regime, guaranteeing every investor – local or foreign, small or large – an equal opportunity to succeed based on their market performance, this troubling trend will continue. The economy may have stabilized under the IMF programme, but sustainable growth cannot take off until policymakers look beyond short-term fixes and resolutely pursue deep, equitable reforms to lift investment to the regional average. It’s time to build a truly level playing field for everyone, fostering an environment where all businesses can thrive and contribute to Pakistan’s brighter future.
Source: Original Article
