Raza Khan

The Pakistan Business Council (PBC) has urged the government to provide more facilities to Chinese companies working in the country to attract more Foreign Direct Investment (FDI) from China, WealthPK reports. The PBC said in its report titled “Catalysing Private Investment in Pakistan: Leveraging the CPEC Opportunity” that China had been already the largest source of FDI in Pakistan since 2015. It said that China had made an investment of $7.2 billion in Pakistan, which was more than 30% of the total foreign investment in the country.

It said that China-Pakistan Economic Corridor (CPEC) provided huge opportunities for the country to attract foreign investment. However, it said that in the first phase of CPEC, Pakistan got a relatively small share of around 5% in China’s outward foreign direct investment in the countries of the Belt and Road Initiative since 2015.

“The interest and momentum of investment from the first phase of CPEC do not appear to have carried over into the second phase as yet or into the manufacturing sector,” said the report. Citing the reasons for low investment by China, it said that Pakistan’s approach to seeking FID was untargeted and too general that needed to be modernised.

“CPEC has afforded a unique opportunity to Pakistan to galvanise private investment and FDI, and transform its economy. China became the number one source of outward foreign direct investment in the world in 2020,” said the report.

According to official data, China’s total direct investment in the countries along the Belt and Road Initiative amounted to $139.85 billion between 2013 and 2020. Pakistan’s share in China’s OFDI since 2013 stood at 5.1%.

The PBC said that Chinese investors had some specific concerns pertaining to the accumulation of large payment arrears, especially in the power sector, inconsistent tax treatment, de-facto exchange controls, inordinate delays in licencing approvals, lengthy and cumbersome procedures for obtaining utilities, and inflexible visa regime.

“These specific issues are not sending favourable signals to Chinese investors in Pakistan, both state-linked as well as private,” said the report.

The PBC said that extra efforts should be made to facilitate Chinese investors in the country so that FDI from China in Pakistan could be enhanced. “It is strange that Pakistan is not among the top 10 countries receiving FDI from China despite being a host of CPEC, which is at forefront of BRI,” it added.

The PBC said that the Council of Common Interests (CCI), the constitutional body to oversee matters affecting both the centre as well as the provinces, needed to be used more effectively in resolving many of the coordination problems affecting investment in the CPEC.

“Non-payment of large outstanding amounts of Chinese firms operating mainly in the power sector is a major problem faced by investors. This issue needs early attention to be addressed,” said the report.

Chinese companies are also demanding an easy visa issuance mechanism for their staff members. It is suggested that a special desk should be set up at all relevant departments to proceed the visa requests of Chinese workers, including the extension in the work visa.

The PBC said that Chinese firms also reported the problem of fluctuating exchange rates in Pakistan that was impacting their profits. “This issue must be tackled in consultation with the State Bank of Pakistan,” it added.

Tax issues faced by Chinese firms should also be resolved through a proper mechanism by the Federal Board of Revenue. “Inconsistent application of tax law, issuance of retroactive notices for past and closed transactions, multiple tax audits within one tax year and long delays in payment of refunds are the main issues faced by Chinese firms, which need to be resolved,” said the report, available with WealthPK.

Credit : Independent News Pakistan-WealthPk