Arooj Zulfiqar

Pakistan is at a pivotal juncture where redefining its investment paradigms can pave the way for a more productive and prosperous economy, says a renowned economist. “One of the major structural issues with the economy is the lack of investment for growth leading to low productivity levels in Pakistan,” said Azfar Ahsan, former chairman of the Board of Investment (BOI), while talking to WealthPK. “In order for Pakistan to experience rapid growth without causing inflation, we must make significant changes to the structure of our economy. This will require our workers to become more productive, which can only be achieved through improved education and increased investment,” he said. “Additionally, we must aim to decrease our personal consumption, increase domestic savings, and invest those savings into initiatives that enhance productivity. While we should welcome foreign investment, it is important to create an environment that fosters collaboration between foreign and local firms to improve productivity and capacity,” he added.

Azfar said the significant drop in profits and dividends has caused foreign investors to lose faith, and it could take several years to regain their trust. The profits and dividends on foreign investments plummeted by approximately 85% during the fiscal year 2022-23, according to the State Bank of Pakistan (SBP) data. In 2021, South Asia received a foreign investment of $175 billion, of which only $2 billion was invested in Pakistan. Pakistan’s investment-to-GDP ratio has hit a record low at 13.5%, highlighting concerns about unemployment. Azfar said removing the barriers to investment in Pakistan can guarantee long-term success for the nation because a more favourable investment climate is a key predictor of overall economic performance. He said the nation’s low investment levels have turned into a significant obstacle to obtaining significant growth.

“Pakistan, a low-income country, is confronted with an ongoing crisis and needs foreign direct investment (FDI) to bring stability to the economy, leading to sustainable economic growth and development,” he emphasised. He said promoting startups can attract significant investment to Pakistan, as small businesses are crucial in driving economic growth and creating job opportunities. “A critical step in this transformation is to establish a conducive environment for both domestic and foreign investment,” the former BOI chairman said. He said Pakistan has taken positive steps in recent years to improve its ease of doing business ranking, but there is more work to be done. He said streamlining bureaucratic processes, ensuring contract enforceability, and enhancing transparency will instil confidence in investors.

Credit: INP-WealthPk