Moaaz Manzoor

Addressing Pakistan’s low investment-to-GDP ratio requires a holistic approach with sector-specific strategies, trust-building between the government and businesses, business-friendly taxation policies, and streamlined regulations to foster both domestic and foreign investment.

Speaking with WealthPK, Dr. Hassan Daud Butt, former CEO of KP Board of Investment and Trade & Special Economic Zone, emphasized the urgency of adopting a holistic strategy to revitalize economy, with specific recommendations for a sectoral and business-friendly approach. Dr. Butt explained that Pakistan needs a "whole-of-government approach" to address its investment challenges. Appreciating the Special Investment Facilitation Council’s (SIFC) efforts, he advocated a balanced regional focus. "The SIFC is doing fairly good work, but I think they need to give equal attention to the opportunities in the Middle East alongside China.

Diversification of focus is critical," he said. He further called for tailored strategies to attract investment in specific sectors. "One-size-fits-all policies are irrelevant in today’s complex economic environment. We must identify key sectors with the potential for rapid growth and channel resources to develop them. This requires sectoral prioritization backed by actionable frameworks," Dr. Butt advised. Muhammad Armughan, senior researcher at the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), highlighted trust deficit between the government and business community as a major impediment to investment.

"Foreign investors hesitate to commit unless they see confidence of the domestic investors. Unfortunately, lack of trust in market regulators among the local businesses has become a self-reinforcing cycle, stifling economic growth," he said. Armughan also underscored the detrimental effects of Pakistan’s high taxation regime. "Exorbitant taxes burden businesses while also incentivizing tax-evasion. This dual challenge not only reduces tax compliance but also hurts the business environment, making it less attractive for investments," he explained. Moreover, he pointed out that Pakistan’s poor ranking in the global ease-of-doing-business index exacerbates the problem.

"Excessive regulations and bureaucratic inefficiencies create unnecessary hurdles for businesses. The government needs to streamline processes to ensure businesses can operate and expand without facing endless regulatory roadblocks," Armughan stressed. The low investment-to-GDP ratio reflects systemic weaknesses in Pakistan’s economic framework, including policy inconsistency, trust deficits, and an unfriendly business environment. Addressing these issues requires a multifaceted approach, combining sector-specific strategies, improved taxation policies, and enhanced ease of doing business. Sustainable growth depends on building confidence among the domestic investors, which can subsequently attract foreign investors.

Credit: INP-WealthPk