The Board of Investment (BoI) has recognised that regulatory impediments, travel advisories and negative media propaganda are the key factors in reduction of foreign director investment (FDI), official sources told Business Recorder. This was the crux of a recent briefing given by the BoI to the Economic Co-ordination Committee of the Cabinet.
"The main global factors are global economic recession, uncertainty and insecurity, slow decision making, inadequate infrastructure, high cost of doing business, poor competitiveness and poor contract enforcement. The internal factors decelerating FDI include lack of capacity, improper exposure to our investment potential, lack of aggressive marketing, lack of co-ordination within ministries/provinces, financial constraints, regularity impediments and negative media propaganda and travel advisories," sources added, quoting from BoI briefing.
Sources said that pursuant to a decision of the ECC in its meeting on September 21, 2010, the BoI--established in 1989--gave a presentation on FDI trends and steps to enhance FDI. The major functions of BoI were stated as formulation and review of investment policies and laws, considering sectoral investments proposals, promotion of investment opportunities, implementation of investment policies, programs and projects, liaise with private sector trade bodies, promote congenial environment for investment and other tasks to nurture investment.
It was stated that BoI has a very liberal investment policy, which provides equal opportunities of investment to local and foreign investors. According to the BoI, it took many steps for attracting investment into the country, such as allowing investment in all sectors of economy, l00 percent foreign equity, remittances of capital, profit, royalty, technical and franchise fee, import of raw material for export manufacturing, zero-rated and bilateral agreements with about 50 countries.
The ECC was informed that the top three FDI outflowing countries in 2009 were United States ($248.0 billion), France ($147.1 billion), and Japan ($74.6 billion) while Pakistan's share was 0.188 percent, 0.005percent and 0.35percent share respectively. The top three sectors of FDI inflows in Pakistan in 2010-11 are ie oil and gas (32.5 percent), power (6.0 percent) and transport (5.8 percent) observed a growth of 5.5 percent, -36.4 percent and -12.0 respectively. Investors have been given incentives by establishing Special Economic Zones (SEZs), featuring duty-free imports, 10 & 5 years tax holidays, 50 percent initial depreciation allowance, one-window facilitation, and access to all utilities and infrastructure.
The major projects facilitated by FDI (totalling $2,446 million) are: Centaurus ($450 million), Patrind ($331 million), Metro ($205 million), Makro ($300 million), Al Tuwairqi ($1,000 million), YKK ($15 million), Hyper Star ($100 million), and P&G ($45 million). The ECC was informed that FDI potential projects (totalling $8.568 billion) are drinking water pipeline Tarbela to Islamabad and Rawalpindi, Mahi Hydro Power Project (500MW), Pakistan's First Solar Projects (100 MW), the construction of Yamaha motorcycle plant in Karachi, Suki Kinari Hydro Power Project (840MW) and Karot Hydro Power Project (720 MW). Upcoming Projects are Reko Diq project (estimated cost $3.2 billion), Thar Coal Sindh is coal mining and power generation project in district Tharparkar, Sindh. The Centaurus (estimated cost $450 million), the construction of 7 star hotel and residential apartments in Islamabad and construction of Patrind Hydropower Project (150 MW) (Khyber Pakhtunkhwa).
It was suggested in the presentation that to ameliorate current FDI conditions, Pakistan needs to target potential regions and investors, bring consistency and compatibility in policies, clear the pending projects immediately, reduce regulatory measures, enhance effective co-ordination between BoI, ministries and provincial govts, remove policy irritants, launch aggressive media campaign/marketing, legislate SEZ framework, restructure and capacity building of BoI.
It was observed that due to inaction on the part of different Ministries/Divisions, the facility of foreign direct investment could not be utilised. Had available investment been utilised in a timely fashion a number of projects could have benefited. It was nevertheless pointed out that after 18th amendment in the Constitution all provinces including relevant stakeholders need to be taken on board, prior to utilisation of foreign investment.
After detailed discussion, the ECC directed BoI to bring up the issues relating to stuck up FDI projects, ongoing or new, in fora like ECC for deliberation and decision or recommendations thereof for appropriate forums like Cabinet Committee on Investment or Council of Common Interests or Inter Provincial Co-ordination Committee for quick and effective resolution of related issues. The BoI was also directed to provide a brief, on regular basis, to the Cabinet Division about such issues/problems affecting FDI, public/private investment for inclusion in the agenda item No 1 of ECC meeting.
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