Foreign Direct Investment in Pakistan: Attractiveness, Obstacles and Opportunities

With globalization fast becoming order of the day, countries – regardless of their status as developing or developed, have started to realize the importance of attracting foreign direct investment in  improving and sustaining their balance of payments and their industrial production. And Pakistan, being a fragile economy with deteriorated balance of payments and faltering industrial growth, is no exception to the phenomenon.

The record shows that the FDI inflow in Pakistan has always been meager and accounting for mere 0.2 per cent of the world total while less than one per cent of the Asian subtotal in the 1990s. Among the major reasons that have been contributing to this phenomenon are inconsistent economic policies, energy crisis, narrow capital market, corruption, bad governance, poor law and order situation, political instability, security situation poor infrastructure, volatile/instable supply of raw material and overall a less conducive environment for the business activities.

Nevertheless, after realizing the importance of FDI in bridging the chasm created by low saving base of the country, the ministry of finance has adopted market oriented policies and has promised to the investor a helping environment. Besides the proactive approach of the successive governments towards attracting the foreign investors, they have also been focusing on marketing the factors like huge market, emerging middle class, vibrant media (ensuring enhanced chances for marketing), cheap labor and government’s commitment for facilitating the foreign investors.

While having a thorough insight into the attractiveness, obstacles and opportunities for foreign direct investment in Pakistan, all these above mentioned factors, both negative and positive, will have to be analyzed at length.  And besides consulting the previous studies on the topic, new trends and factors affecting FDI will also need to be studied and their affect on the foreign direct investment be assessed.

Finally, the institutions like chambers of commerce – the so called SMEs (small and medium enterprises) of the country, too will have to pressurize the present incumbent to switch its attention from the selected few industries (read cartels) to facilitating the new entrepreneurs. Instead of giving tax breaks to the tax evaders, focus must be diverted towards creating new business opportunities in the country.

Posted by Fayyaz Yaseen on Oct 17 2011. Filed under Editorial, Pakistan. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry