Expert says foreign investment in Pakistan low

* In China foreign investment is around $60 billion

By Fida Hussain

ISLAMABAD: The bulk of foreign investment in Pakistan is coming from Middle Eastern countries and this investment is not supposed to benefit the country in terms of bringing knowledge, technology, new management skills and new professionalism, which are essential to bring about innovations and competitiveness in the economy, Arthur Bayhan, Chief Executive Officer of the Competitiveness Support Fund (CSF), told the Daily Times on Wednesday.

In an exclusive interview with this newspaper on Wednesday, he said investment is very low in Pakistan if we compare its volume with those in China and India. In China, foreign investment is around $60 billion. This investment brought hi-tech, new skills in management and professionalism, which brings the Chinese entrepreneurs at competitive edge in the market, said Mr Bayhan.

The Spain-based “The Competitive Institute (TCI) ” is going to hold a regional conference on “Competitiveness and Economic Growth in Asia” on May 14. The three-day conference, which is first of its kind, will take stock of Pakistan’s global competitiveness and suggest ways and means to ensure innovations and competitiveness of Pakistani products.

The real problem with investment coming from the Middle East is that it brings only capital. Such investment does not bring the skill required for stability and improvement in production and manufacturing goods that can compete in the world market, he said.

Mr Bayhan said currently Pakistan is working on framing an Anti-Monopoly Law in cooperation with the World Bank and an insolvency law in cooperation with the Asian Development Bank (ADB). It is also working on improving Intellectual Property Rights Law in cooperation with the US government. The government is also planning to grant independent status to the Federal Bureau of Statistics (FBS). All these steps have been taken in the right direction. The only addition, which must be made, is the introduction of local arbitration to the foreign investors as seeking arbitration from Washington and Paris-based institutions is much expensive and costlier.

Apart from this the dispensation of justice must be made easy in Pakistan. The working of judiciary must be improved, simple and easy to understand customs rules and improved communication and transport network is another precondition for attracting investment, he added. The regulatory framework must be put in place to attract investment and improve the quality of products.

There are various problems Pakistan is facing. But the major ones are that its private sector is not focused. The sector does not have any long-term strategy. As far as the government is concerned, it is almost deprived of professionalism. The existence of transparency in the government functioning is always questionable, he added. The level of working in the public institutions is very low.

He says he does not see that the reason for low investment is the lack or absence of security in Pakistan. In my personal view, it is the lack of proper regulatory framework, which impedes investment from the foreign companies, he added.

The government thinks that the establishment free trade zones, granting tax holidays, investment incentives and the availability of low wages will work for bringing more and more investment. “But this is not the real case. This will work only to a very limited extent,” he said. If we take the case of India, foreign investors opt to do business there because of the availability of a skilled workforce. Like China, there is also a regulatory framework in place.

Mr Bayhan also criticized the government policy of protecting the local industry. This thing really discourages innovations in the manufacturing side. If the local industry is protected by the government, the industry will not go for innovations. This really impedes the prospective investors from other countries.

“Protection to local industry is an enemy of economic development,” he stressed. In 1996, Turkey abolished customs duty on imports from the countries of the European Union (EU). The Turkish industries in the private sector lodged a strong protest. But the Ankara authorities went ahead with the plan and gradually the Turkish industrial sector did respond to the new challenges that had emerged due to the new policy.

Asia is the world’s fastest growing region led by China whose growth rate will soon make it the world’s fourth largest economy. China and India have begun to dominate segments of the global chain, including those which are knowledge-based and where the innovation and increased productivity are critical such as information technology. Asia, he said, is attracting the interest of business people, policy-makers and academics from all over the world as a market, an investment location, a production platform and a competitor. The conference will look into it. The conference will also look into the prospects of enhancing business and trade relations in different regions of Asia, he added.

He said the CSF would help the government to have a regulatory reform in Pakistan. The CSF will financially support research-based projects. We will inform the government about the new economic sector or sectors for innovations. We will also provide financial incubation for projects in new sectors. Besides this, the CSF would also try to enhance venture capital in Pakistan. It is well established in India and China and so we will do in Pakistan. The CSF will also give away awards to companies, which are export oriented.

http://www.dailytimes.com.pk/default.asp?p...1-5-2006_pg5_14

what this expert should take note of is that this US$3 billion FDI is the HIGHEST in pakistans history and it will increase

in china remitences from ppl abroad are included in FDI.... FDI of india is 9BN USD.. and FDI of bangladesh is 110MN USD ... so it is not bad at all ..but privitisation of key government organisations such as PTCL and Karachi Steal mill played important role in FDI...therefore the base of this 3 or 3.8 BN USD FDI is concernably short...to sustain this figure, FDI base must be broaden otherwise we may not be able to touch that point even very next year

The article is biased, FDI is pouring into Pakistan like never before.
Btw, how the hell can one compare China with $60 billion FDi to Pakistan with $3 billion?
China's GDP is almost touching 2 trillion mark!

Maybe Miss Fida Hussain should take some economic lessons before reporting such BS!

Pakistan should look at targetting around $6.7bn in FDI and $6.4bn in remmitances, Currently we are seeing around $3bn in FDI and around $3.4bn in remmitances, an Increase of $3bn odd for each is easily achieveable, and we should look to sustain that ammount of remittence and fdi over a period of 5-10 years.

Note, its important we get more large scale FDI, more steel mills, chemical plants, power generation, water and ofcourse IT, telecoms, media.

$6.7bn in FDI and $6.4bn in remmitances should be our target, and we should look to sustain it.

The author doesnt say how indian FDI is only alittle less than 7billion where pakistan a country 7 times smallers than india and with much less resources has an FDI of over 3 billion and still growing. He's also trying to put india on the same level of china knows that like comparing papua new guinea to australia.

Pakistans foriegn investment will literally blow off the charts starting from 2009 just watch and see

the article does make some valid points though. there is a need for a proper regulatory framework. if the govt can work towards putting that in place then potential investors will have a much clearer picture of how business is being conducted in this country and it will help in boosting confidence. better judiciary will have the same desired effect. intellectual property rights are also important else compaies will not want to invest if their inventions and innovations are not going to be properly respected and going to be copied left and right.

the article also makes a very valid point in that the govt needs to stop protecting the local industry. exposing them to international competition will help them to develop, adapt and compete if they are to survive. you can only use the whole infant industry argument so much, if you keep barriers up the local industry just becomes complacent and will not modernise to the extent it should.

comparing FDI levels with China is ridiculous though. you can't compare the FDI levels in a much smaller, less developed country as compared to fastest developing country in the world! it's like comparing apples and pears.

are tehse people out of thier minds?¬! Investment has been higher tahn ever before, they compare Pakistan to china....

china is an economic ginat, right now we are an economic ant...