We have been consistently highlighting the issue of dwindling foreign investment, along with the possible reasons for this unfavourable development and its highly adverse consequences for the economy in our editorial comments. As if the poor law and order situation, political uncertainty and a near breakdown in the reform process was not enough, another element seems to have been added to deter foreign investors in the form of security clearance from looking at Pakistan as a favourable destination of investment. The step was taken about six months ago when the ministry of interior widened the scope of security clearance by asking foreign companies, directors and even the existing foreign directors who get re-elected on boards of companies to get prior clearance and NOC. In the past, this condition was restricted to security service companies, NGOs having foreign funding or involving foreigners and companies having Indian nationals. The measure seems to have been taken in the wake of the Raymond Davis incident in Lahore and the May 2 Abbottabad operation and the SECP was asked to put all cases to the interior ministry for processing for mandatory NOC involving foreigners before incorporation and registration with the Commission and the Board of Investment (BoI). The SECP, which works as a watchdog over the activities of the corporate sector, was also asked by the ministry to compile eight sets of documents for each case for granting NOC and security clearance. It is not difficult to see that this new condition of getting NOC and security clearance for all categories of foreign investors would prove another irritant for them and take its toll over aggregate DFI in the country. The measure would have been somewhat tolerable if the government machinery was efficient enough to accord approvals on a fast track basis at least to the investors who were not likely to be involved in activities which were sought to be prohibited by the government. However, corporate consultants are complaining that most of the ministry's relevant officials were involved in corruption and intentionally delayed clearance of cases for getting undue favours. A lengthy and cumbersome procedure was adopted with the result that it usually took three to four months for getting the necessary clearance. Registration of several companies involving foreigners was reported to be pending with the SECP since long for want of security clearance from the ministry. Obviously if such delays and bottlenecks were not removed, flow of foreign investment which is already at a dismally low level will slump further. It needs no emphasis that most of the developing countries rely on foreign investment to spur growth and employment and Pakistan is no exception to this rule. In fact, our country is more dependent on DFI than others due to lack of domestic savings and entrepreneurial ability. Although the overall impact of the new rule on foreign investment and the economy cannot be exactly quantified, yet it sends out a very wrong signal and reinforces the impression that foreign investors could find themselves under suspicion for unexplained reasons. This would obviously give another reason to the foreign investors to avoid the country and diminish its prospects for growth. We would, therefore, urge upon the policymakers to re-evaluate the condition of the NOC and clearance, keeping in view few factors relevant to the situation. First and foremost, it needs to be pointed out that foreign investors are mostly concerned about the security and profitability of their funds and, as such, are hardly interested in non-business or subversive activities. Black sheep, if any, could be avoided by certain more circumspect action rather than giving a tough time to every investor. We understand that nobody would like to risk the country's security but, in our view, it is equally important at this juncture to welcome foreign investment and ensure economic security for accelerating development and creating jobs. However, if it was not at all possible to revert to the old arrangement of restricting clearance to only sensitive enterprises at this stage due to some unavoidable reasons, at least a mechanism could be put in place to process the NOC and clearance applications expeditiously and more transparently so as to completely eliminate the chances of corruption and delay. This could preferably be done in consultation with the relevant stakeholders, especially foreign investors already doing business in the country. In all fairness, foreign investors need to be more honoured and less censured when there is acute paucity of domestic resources to keep the wheel of the economy moving. Copyright Business Recorder, 2012
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