Ayesha Saba

Experts have called for a review of the investment policy framework, addressing bureaucratic bottlenecks, and improving the security and political climate to attract long-term, export-oriented foreign direct investment in the country. They note that without such measures, Pakistan risks missing out on global investment trends that could drive economic growth and stability.

Talking to WealthPK, Majid Shabbir, former adviser to the Islamabad Chamber of Commerce and Industries and Chief Executive Officer of Ifsha Consultants, a professional service provider, said most recent FDI and local investment have been concentrated in protected sectors such as automobiles, shopping malls, and retail outlets. “These sectors provide quick returns but do little to enhance Pakistan’s export potential.

There is now a growing realisation that FDI should be directed toward export-oriented industries, yet the existing policy framework does not differentiate between market-seeking and export-driven investments.” Shabbir noted that investor confidence is a critical issue in Pakistan as new investments whether foreign or domestic are unlikely to materialise unless existing investors are satisfied with the overall business climate. “This is because investors closely observe how the government treats current businesses before committing their capital.

If existing investors face policy uncertainty, regulatory burdens, inconsistent taxation, or difficulties in repatriating profits, it raises concerns for potential investors and discourages them from entering the market,” he added. “We need to expand our market to global firms with an environment that ensures a level playing field and encourages their participation through streamlined regulatory procedures, transparent tax and trade policies, and investment-friendly infrastructure,” he emphasised.

Meanwhile, speaking to WealthPK, Junaid Ahmed, a senior research economist at Pakistan Institute of Development Economics, said Pakistan’s current FDI strategy has resulted in substantial capital outflows due to profit repatriation, dividend payments, and royalty transfers to investors' home countries. “Furthermore, the high import bill associated with these investments has significantly reduced the funds available for reinvestment within Pakistan.

Consequently, this approach has neither contributed meaningfully to export growth nor improved the country’s balance of payments,” he maintained. To mitigate these challenges, Ahmed advocated for a strategic reorientation towards efficiency-seeking, export-oriented FDI. “This approach aims to attract investments that extend beyond serving the domestic market and facilitate Pakistan’s integration into global supply chains, thereby enhancing its export capabilities.”

Aligning Pakistan’s FDI strategy with global trends requires a shift toward efficiency-seeking, export-oriented investments. Targeted policy reforms, labour market competitiveness, political stability, regulatory streamlining, and trade agreements are crucial to creating a conducive investment environment. This strategic pivot is vital for sustainable growth and global economic integration.

Credit: INP-WealthPk