Ayesha Saba

Depressed economic conditions coupled with rising inflation, an unpredictable policy environment and fluctuating exchange rate is driving down both the domestic and foreign direct investment. “Pakistan desperately needs to improve the investment climate through prudent policies to effectively tackle the challenge of surging debt,” stressed Muhammad Azfar Ahsan, former chairman of Board of Investment. Talking to WealthPK, he pointed out that given the structural issues inherent in Pakistan’s economy, no single policy reform or measure could help transform the country into an economically stable and prosperous country in the short term. He said Pakistan’s economy needed both short and long-term measures to proactively tackle the impediments to sustained economic growth.

He added that some of the major areas in which policy interventions were required included structural reforms and improving the investment climate. On the issue of FDI, Azfar Ahsan asserted that consistency in policies and political stability would encourage investors to come to Pakistan and launch their ventures. “The biggest challenge is the prevailing policy uncertainty, which erodes investor confidence and hampers long-term investments.” The former Board of Investment chairman lamented that Pakistan had so far failed to facilitate the private sector to a big extent, leading to low investments and low production base.

He emphasised the need for the relevant departments to ensure that money and talent were stopped from leaving the country due to political instability and cumbersome regulatory regime. He suggested that Pakistan should open to global firms by providing them with a level playing field, streamlining regulatory procedures and implementing transparent tax and trade policies. “To achieve this, it is crucial that Pakistan establishes a comprehensive framework that not only attracts international investors but also helps them grow as they want,” he stated. The FDI for the fiscal year that ended on June 30, 2023 in different sectors of the economy fell to a four-year low of $1.45 billion, a staggering 25% decrease when compared with $1.93 billion in FY22.

Meanwhile, Majid Shabbir, general secretary of Islamabad Chamber of Commerce and Industry, told WealthPK that Pakistan remained trapped in a low-saving and low-investment situation, which had constrained its economic potential. He said the economy was likely to shrink further due to runaway inflation and high interest rates in the coming years. He said shrinking fiscal space posed a major challenge for maintaining the already low levels of investment in the country. Shabbir stated that all industrialised nations heavily invested in development of the engineering sector to create jobs and boost exports of value-added products. “This type of investment should be our priority to expand and diversify our manufacturing base and export markets.”

Credit: INP-WealthPk