Chance at redemption: legal perspective on role of private investment in climate change mitigation

Pakistan is highly vulnerable to climate risks, ranking eighth on the Global Climate Risk Index (2021). Extreme weather events like the floods in 2010 and the recent 2022 event have devastated the country and exacerbating its ongoing economic and political crises.

The UNFCCC's COP 27 Summit has established a 'loss and damages' fund to help developing countries cope with climate change, for which Pakistan is a highly eligible beneficiary. France has already pledged €170 million in grants for the Global Shield against Climate Risks, and it is hoped that future funding will be substantial and not in the form of loans or debts.

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The country’s vulnerability to climate change offers investment opportunities in renewable energy, water, waste management, and agriculture. Recent floods have severely affected agriculture, leading to food insecurity and setbacks for rural communities.

Investing in climate-resilient agriculture using practices suggested by the Food and Agricultural Organization (FAO), such as sustainable pesticides and fertilisers, offers a promising opportunity for private sector development.

The adoption of these practices could provide significant investment opportunities for private businesses in Pakistan's agriculture sector.

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To further encourage investment in developing high-yielding, climate-resilient crop varieties, the Plant Breeders’ Rights Act, 2016 grants intellectual property protection to plant breeders who register specific seed varieties in the PBR Registry. Under this act, breeders have exclusive rights to grow and sell their plant variety for a limited time, encouraging investment in the sector.

The State Bank of Pakistan's (SBP) report 'Investigating Pakistan's Seed Industry Dynamics' explains the lack of intellectual property rights was one reason for the decrease in cotton yield over the years. The report stated that without IPRs, breeders lacked incentives to invest in high-quality varieties, which discouraged leading multinational companies (MNCs) like Monsanto and Syngenta from entering Pakistan's market.

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The 2016 Plant Breeders' Rights Act has resolved this issue and opened up endless opportunities for seed development investment, including biological research institutions, educational institutions for farmers, and franchising opportunities for MNCs.

India recently announced the release of 35 new seed varieties that are not only high-yielding and nutritious, but also climate-resilient. These include chickpea, soybean, rice, bio-fortified varieties of wheat, pearl millet, maize, and chickpea.

If Pakistan wants to tackle climate change, private investment in agriculture and related sectors is vital.

Such investment can bring enormous benefits, from creating jobs to driving sustainable economic growth. But for this to happen, policymakers need to create a better investment climate.

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While the Plant Breeders’ Rights Act has provided a proper legal framework for businesses to invest in the seed/agriculture industry, there is still an investment gap when it comes to foreign businesses investing in Pakistan.

Developed countries adopt a method of using incentives to attract foreign investment in the agricultural sector by participating in the process of legalising investment procedures in conjunction with Foreign Investment Laws, which complements civil and banking rights. Additionally, civil law regulates payment for received raw materials, performed work, and rendered services based on property, economic, and contractual relations.

Pakistan faces challenges in attracting foreign direct investment (FDI) due to inconsistent economic growth, a balance of payment crisis, and a poor taxation system.

Tax policies change depending on the government's priority, and there are no formal investment incentives like tax deferrals or subsidised loans. To attract FDI, Pakistan needs to comply with international standards against money laundering and terrorism financing, ensure consistent tax policies, create an efficient tax system, and provide a stable political environment.

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The agricultural sector, which significantly contributes to the economy, should be taxed proportionally and incentivized for corporate investors who are able to use best practices to maximize yields.

Angola serves as an excellent case study of a country that is attracting private investments in agriculture. Highly dependent on oil, the country is facing economic challenges due to weak prices and declining production. To attract private investment and diversify the economy, the government has implemented reforms including privatization, anti-corruption measures, and exchange rate liberalization.

Agriculture, with enormous potential for investment, can drive growth and agribusiness diversification. President João Lourenço's administration has reduced national debt and created opportunities through the New Private Investment Law of 2018 and the Luanda/Bengo Special Economic Zone. These reforms offer a stable business environment with high-quality services, putting all investors on an equal footing and safeguarding capital repatriation.

Time is running out for Pakistan to attract crucial investments in climate-related sectors.

The government must act decisively, allocate funds strategically and develop robust policies that are enforced rigorously to attract investors. While the intellectual property protection laws for plant breeders are commendable, more must be done to incentivize private investments and to create a secure and sustainable business environment in the agricultural sector.

Failure to act now risks forfeiting much-needed investments that are essential in the battle against climate change.

The article does not necessarily reflect the opinion of Business Recorder or its owners