Syed Marwan Shah

A favourable business environment plays a pivotal role in attracting foreign investment and ensuring sustainable economic growth, reports WealthPK. For a country like Pakistan, foreign direct investment (FDI) is a crucial element in fostering overall economic growth and development. Furthermore, a conducive business environment in the country will result in an increase in foreign investment. In that regard, the State Bank of Pakistan and Securities and Exchange Commission of Pakistan are consistently striving to streamline their respective rules and procedures. This will encourage growth and modernization of business activity in Pakistan and attract foreign investment.

In recent years, the regulatory environment has become more conducive, with guides published and dedicated helplines available to assist new entrants. Additionally, significant legislative changes are being introduced, and regulators are working closely with experts and stakeholders to advance these initiatives. Pakistan has, however, achieved several points in the World Bank's annual ranking of the Ease of Doing Business (EDB). Further, there is still much work to be done in terms of business regulatory reforms in order to attract more foreign as well as local investors.

According to the Board of Investment, Pakistan has been known as the top performer in South Asia and the sixth-best reformer in the world’s EDB rankings. A number of EDB indicators improved, including starting a business, registering a property, getting construction permits, obtaining electricity, trading across borders, and paying taxes. In that manner, the Board of Investment has formulated five reasons to invest in Pakistan: first, geo-strategic location; Pakistan is strategically located to become Asia’s premier trade, energy, and transport corridor. It is also the gateway to the energy-rich Central Asian States and the financially liquid Gulf States. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities.

Second, population and workforce; more than 55 percent of our population is below the age of 19, which bodes well for long-term sustainable economic growth. Third, the economic outlook; despite the Covid-19 pandemic, Pakistan’s economy has still outperformed and stands at a 5.97 percent growth rate. Fourth, investment policy; the policy has been designed to provide a comprehensive framework for creating a conducive business environment for attracting FDI. Pakistan's policy trends have been consistent, with liberalization, de-regulation, privatization, and facilitation being its foremost cornerstones.

Fifth, special economic zones; the Law of Special Economic Zones has been made to meet the global challenges of competitiveness to attract FDI. The law allows for creation of industrial clusters with liberal incentives, infrastructure, and investor facilitation services to enhance productivity and reduce the cost of doing business for economic development and poverty reduction. The Law further envisages reducing processes through the SEZ in Pakistan.

The World Bank study examined that attracting foreign investment helps to link a country’s economy to global value chains and facilitates economic upgrading. Through foreign direct investment, countries gain investment, jobs, increased exports, supply chain spillovers, new technologies, and innovative business practices. While the benefits of investment from abroad are well recognized, they do not flow without a conducive policy, legal and institutional environment.

The China-Pakistan Economic Corridor (CPEC) provides Pakistan with a unique opportunity to galvanize private investment and foreign direct investment and transform its economy, according to the Pakistan Business Council. China is now the largest source of inward FDI in Pakistan cumulatively since 2015, accounting for over 30 percent of the total, with an investment value of $7.2 billion.

To further economic transformation in the FDI-targeted sectors, Pakistan should evaluate high-quality investments that provide market access, technology, and capabilities. It is equally important to address Pakistan's generic, long-standing investment environment weaknesses that affect foreign and domestic investors alike. Even well-functioning SEZs should not be the end goal of investment policy, but rather an element of a broader industrial policy.

Credit : Independent News Pakistan-WealthPk