A high-powered 250-member Japanese business delegation is due in Pakistan in the last week of September, said an official. Federal Secretary of Board of Investment (BoI) Asad Rehman Gillani said at a meeting of the Lahore Chamber of Commerce and Industry that the Japanese delegation is coming to identify available opportunities in various sectors. He also informed that a business delegation from Pakistan will visit Saudi Arabia on October 29-30 as the Saudi businessmen are keen to step into joint ventures with their Pakistani counterparts.

Gillani said that Prime Minister Shahbaz Sharif has directed that all hurdles be removed to facilitate foreign direct investment (FDI). He admitted that the investment was not coming according to expectations, and said that political instability was a main reason. According to a statement received by WealthPK, the BoI official said that special economic zones (SEZs) have a 10-year tax holiday and machinery can be imported tax-free. He said that the procedures, rules and regulations for setting-up industries in the SEZs are being made easier. He said the business community will be taken on board once the draft in this regard is prepared.

The official said the Securities and Exchange Commission of Pakistan (SECP) provide nine licences online to the corporate companies, while the registration of companies is also processed online. The LCCI President Mian Nauman Kabir said at the meeting that the business community has reservations over the constant dip in FDI in the country. According to the State Bank of Pakistan (SBP) statistics, the net FDI in financial year 2021-22 stood at merely 1.87 billion dollars as compared to $1.82 billion in 2020-21. He was of the view that in order to deal with the current economic challenges, the level of net FDI in Pakistan needs to be enhanced to at least $10 billion.

Nauman mentioned that in the first month of the current financial year i.e. July 2022, the net FDI was just $59 million as compared to $104 million in the corresponding month the previous year. “Going at this rate, it would be even difficult to maintain the level of FDI achieved during 2021-22,” he warned. The LCCI president said that according to the State Bank data, Pakistan’s recent FDI inflows are concentrated in the sectors like power, financial services, oil and gas and communications. “There is a great potential to attract FDI inflows in the sectors like construction, housing, tourism, food processing, logistics, value added textiles, automobiles and renewable energy, etc.,” he pointed out.

Nauman said that in addition to the FDI inflows, local investment also needs a boost. He pointed out that total investment as a percentage of GDP (gross domestic product) has been stagnant at around 15% for the last three years, which indicates the lack of trust of local investors in the economic system. The LCCI president said that one can lay the blame on issues like law and order, macro-economic instability (due to rupee devaluation, inflation and policy rate hike), political volatility and energy shortages for the declining trend in the FDI inflows.

“But we must realize that these reasons will not be addressed or rooted out overnight. We have to find a way forward despite all these odds,” he said. “We also need to be cognizant of the issues like inconsistency in our economic policies, particularly related to taxation and the lack of effective integration with the regional and global economy,” Nauman said. The LCCI president said that this scenario requires a complete review of the current investment policy regime.

“There is a need for a pragmatic and multi-dimensional investment strategy which should not only incentivize local and foreign investors, but also attract new investments across the diverse sectors of the economy. By focusing on ease of doing business, there is a need to review old regulations with a Regulatory Guillotine and replace them with smart and prudent regulations to facilitate investment,” he suggested. He said that the multiple taxes at the federal and provincial level act a deterrent for the investors.

“To ease the taxation regime for investors, there is need for harmonization of taxes at the federal and provincial level through better digitization and furthermore,” he said.

Nauman said that in addition to ease of doing business, Pakistan also needs to focus on the cost of doing business and make sure it remains competitive with other economies in the region in terms of policy rate, electricity tariff, gas tariff, land cost, fuel rates and transportation cost.

Credit: Independent News Pakistan-WealthPk