Arooj Zulfiqar

Creating a business-friendly ecosystem is crucial for Pakistan to attract foreign direct investment, drive economic growth, and unlock the full potential of its diverse industries.

“In an era of global economic uncertainties, Pakistan’s ability to attract foreign investment hinges on the creation of a business-friendly environment,” noted Dr Sajid Amin, an eminent economist and Deputy Executive Director of Sustainable Development Policy Institute (SDPI). Speaking to WealthPK, he said, “Pakistan's economy holds immense potential owing to its strategic geographical location, vast natural resources and a youthful workforce. However, persistent barriers such as an unstable regulatory environment, insufficient infrastructure and complex tax structures have deterred many investors. These challenges have resulted in lower-than-expected FDI inflows.” Amin said that Pakistan could position itself as a regional hub for investment by aligning its policies with global best practices. “To attract foreign investors, there needs to be predictability in government policies and consistency in regulatory frameworks.” He said, “Pakistan must move away from ad-hoc measures and focus on long-term, investor-friendly policies.”

“One of the main barriers to foreign investment in Pakistan is its underdeveloped infrastructure, particularly in the energy and transportation sectors,” he said. “Energy shortages remain a critical issue, leading to production delays and high operational costs. Addressing the energy crisis by enhancing renewable energy capacities, as well as upgrading the aging power infrastructure, is essential for businesses to thrive and attract international investments,” the SDPI economist stressed. Amin said to further stimulate foreign investment, Pakistan should explore emerging sectors such as information technology, renewable energy, and agriculture. “The global shift towards sustainable energy presents a unique opportunity for Pakistan to attract green investments.” “Additionally, the country’s agricultural sector holds tremendous potential for investment, especially in corporate farming and agro-tech innovations.

By introducing advanced technologies in crop production and irrigation, Pakistan can not only meet its domestic food needs but also become a significant exporter,” the SDP deputy executive director emphasised. It is to mention here that total FDI, portfolio investments and foreign public investment increased by 80% to $453.2 million in the first two months of the ongoing fiscal year 2024-25. According to a report from the State Bank of Pakistan, FDI increased by 55.5% in the first two months of FY25. During the months of July and August, the country received FDI amounting to $350.3 million as opposed to $225.2 million in the same period last year. The cumulative FDI inflow during this period was $495 million, while outflows stood at $144.5 million. On a month-on-month basis, FDI saw an increase in August 2024, reaching $214 million compared to $142 million in August 2023.

Credit: INP-WealthPk