Investment regulations and economy

Investment plays a crucial role in economic growth and development of nations. The declining trend of investment in Pakistan does not support the economic progress and industrialisation. Pakistan is also in-competitive in cross border trade due to physical infrastructure particularly weak transport and logistics infrastructure. To accelerate investment and industrialization in the country, we have to develop physical infrastructure of ports, means of transportation, energy and communications in order to reduce cost of transportation.
The history of public finance in Pakistan indicates the misuse of funds for the development of politically-motivated projects: to offset the losses of commercial institutions in the public sector, to create inflated employment opportunities, to subsidise public services and to finance unnecessary populist projects. We suggest that such developmental works should be based on private sector investment. Particularly, foreign direct investment should be promoted for the developmental works on the patterns of Lahore-Islamabad Motorway.
We are lacking the development finance institutions (DFIs). In past, Development Finance Institutions (DFIs) have been playing an important role in the development of infrastructure in Pakistan. NDFC, PICIC, PIDC, IDB and BEL are included in these institutions. In the absence of these institutions we suggested a 'New Development Initiative program'. It will not be a part of PSDP and will be govern by a separate board of governors including representation of stakeholders' holders from private sector. Here, it is noteworthy that inducement of private investment particularly foreign direct investment is the only feasible option to develop the badly deteriorated infrastructure in Pakistan. Greenfield investment and capitalization of the savings of expatriate Pakistanis are also included in this program. The stagnancy of traditional fiscal policies in Pakistan has failed to revive the economy and we do not have fiscal space for badly needed developing projects.
In February 2013 the Prime Minister announced to introduce green field Investment in Pakistan but still we are waiting the details of this scheme which require liberalising the rules and regulations. Though, government has introduced Greenfield Investment scheme for such developmental projects, but necessary legal framework and administrative measures have not been taken to implement those investment policies till now. We will have to highlight and then amend all those administrative obstacles which are discouraging investment. Those obstacles may be at local, provincial or federal government levels.
Business competiveness, economic growth, public welfare, enhancement in investment activities and regulating the capital market are interrelated phenomena. There is no doubt that mega projects are required in the economy. Gwadar-Kashgar railway link, Motorways and linked highways, construction of big dams and energy producing and transmitting networks, and expansion in ports capacity are required at the initial stage of accelerated development process. These projects will lead the enhanced activities in construction, energy, steel, mining, transport and financial sector. We suggest avoiding from politicising these economic ventures. It is possible only when we create transparency and liberalisation for all stakeholders on competitive basis without discrimination.
It was observed that major irritants in the systems are not based on economic policies; these are based on administrative measures and procedural requirements. To avoid from administrative and regulatory obstacles in the developing process, we initiated a 'New Development Initiatives Program', which is a disparity from traditional approach. It is a major change in the public sector investment in development programs. Such initiatives belong to the proposed Kashgar-Gwadar rail link, Gwadar link with the rest of country through motorways and highways and development of energy and transport related projects. WTO mechanism permits the subsidies and public spending on infrastructure development. We strongly recommended that government should focus on the development of physical infrastructure through public funding. It may substitute the necessities of other kinds of subsidies in future.
We are well aware about the impact of oil prices on world economy. This impact which was accompanied with the global recession has affected the world stock markets and investment activities. Pakistan has no exemption. In the globalise economic linkages no country has exemption to keep it isolate from global impacts. However, the economic survival of Pakistan is attached with the investment and particularly the inflow of FDI. Our economic survival has been attached with the investment activities.
The accelerated economic growth in long-term and providing the relief to over burden segments of the society in short-term are the basic principles which have been adopted in the formulation of budget proposals. In survival strategy, our main target was to control over poverty by reducing inflation and unemployment.