Barriers To Foreign Investment in Pakistan (Ishraq Ahmed Hashmi)

More than a year has passed since the establishment of the Special Investment Facilitation Council (SIFC), which was established to promote foreign direct investment in the country. Over the course of a year, this high-level institution has shown significant activity in coordinating with the governments of friendly countries to increase foreign direct investment. As a result, some friendly countries have made announcements and promises of large investments. However, no concrete progress has yet been made in this regard. In a sense, it is a matter of concern that after the establishment of SIFC, foreign investment has declined rather than increased and foreign direct investment in the country has reached a 50-year low. The government had set a target of more than 15 percent for foreign investment in the current financial year, but according to the data released by the National Accounts Committee, foreign investment in the country during the current financial year was 13.1 percent of the GDP.

Currently, Pakistan is facing numerous problems regarding the increase in foreign investment. These problems include political instability, security concerns, inconsistent economic policies, infrastructure failures, corruption, complicated laws, economic instability, trade barriers to market access, shortage of skilled labor and negative perception of the country at the global level. . Frequent changes in government, political unrest and security issues, such as terrorism and crime, have historically been significant deterrents for investors.

Although the security situation has improved in recent years, lingering perceptions of risk can still influence investment decisions. Conflicting economic policies, regulatory hurdles and uncooperative bureaucratic policies create an unpredictable business environment that discourages investors seeking stability and transparency. In addition, poor infrastructure, energy shortages and rising prices, inadequate means of transportation and limited technological infrastructure limit investment opportunities. Also, high levels of corruption and lack of transparency in business dealings discourage foreign investors. On the other hand, lack of confidence in the government's ability to enforce the law and lengthy legal process are obstacles to investors. Likewise, an uncertain economic outlook due to inflation, currency fluctuations and fiscal deficits caused by macroeconomic instability. This creates an environment that makes long-term investment planning difficult. Tariff, non-tariff barriers and a complex customs process make it difficult for foreign companies to enter and operate in the Pakistani market. Although Pakistan has a large workforce available, most of them do not have the skills required to work in modern technology and industries, making efforts to attract foreign investment ineffective. To solve these problems, Pakistan needs political stability, improving the security situation, simplifying the regulatory process, investing in infrastructure, fighting corruption, making the judicial system functional, stabilizing the economic environment, reducing trade barriers. Along with this, attention needs to be paid to tailoring education and technical training programs to the needs of industries. Positive initiatives in these sectors can significantly improve the foreign investment climate. It should be noted that despite unfavorable conditions, several sectors in Pakistan have traditionally attracted foreign investment due to their growth potential and strategic importance. Is. The energy sector, particularly power generation and oil and gas exploration, has attracted substantial foreign investment. Pakistan is facing an energy deficit, investment in renewable energy sources is also increasing. The recent past has seen significant foreign investment in the telecommunications sector, particularly with the expansion of mobile networks and Internet services. Even now, major telecom companies are keen to invest in Pakistan. In addition, infrastructure development including roads, bridges and urban development projects have attracted foreign investors. The China Pakistan Economic Corridor (cpec) has been a major driver for bringing in Chinese investment for various infrastructure projects. One of Pakistan's largest industries, the textile and garment sector has historically always attracted foreign investment. Foreign investors are interested in taking advantage of Pakistan's large workforce and its status as a major cotton producing country. Similarly, the banking and financial services sector has attracted foreign direct investment. This sector supports other industries and economicIt is important to promote development. Similarly, the information technology sector also has considerable potential to attract foreign investment, while the mining of mineral resources, including coal, copper, gold and precious stones, can also prove to be an important source of foreign investment. However, there is a need for continued efforts to improve the business environment and address the current challenges.