Future drivers of country’s growth

The incumbent government, in the very last leg of its tenure, has sowed the seeds of agriculture, mineral and mines, and IT as the future drivers of the country’s economic growth - to be nurtured by whichever political party or grouping picks assumes the reins of power after the upcoming election.

To bolster the credentials of this strategy, the relevant stakeholders of the country have pledged their direct involvement and support to the effort and the government has recently managed approval of a legislation, from both houses of parliament, to set up a Sovereign Wealth Fund.

This wealth fund, set up under an Act of Parliament, has under it a number of sub-funds such as agriculture fund, mineral and mines fund, and IT fund. Investors are offered the choice to invest under a sub-fund of the sovereign fund or a corporate sector special vehicle.

A platform by the name of “Special Investment Facilitation Council (SIFC)” has been established with a mandate to frame economic policies that ensure policy predictability, continuity & effective implementation to revive the economy”.

This core body, SIFC, shall facilitate the investors by providing one-window service. The government policy is silent on the role of the Federal Board of Investment (BoI), which operates under the almost similar mandate.

Early this week the foreign investors and industry experts gathered at Islamabad at the ‘Pakistan Minerals Summit’ aimed at exploring investment opportunities in Pakistan’s $6 trillion estimated worth of mineral deposits.

The minerals summit titled “Dust to Development: Investment Opportunities in Pakistan” was a joint effort by Pakistan’s Special Investment Facilitation Council (SIFC) and Canada-based Barrick Gold Corporation, facilitated by Pakistan’s Ministry of Petroleum.

The summit brought together international investors, mining industry and corporate leaders, and government stakeholders to create a roadmap for tapping into the tremendous mineral riches that the country offers today. Participation from Saudi Arabia and other Gulf states was at a ministerial level. Demonstrating their keen interest in the sector was indeed an encouraging sign.

The choice of agriculture, mineral and mines, and IT as the future drivers of the country’s growth is an appropriate option under the prevailing economic constraints where industry and businesses in the country are challenged by high utility tariffs, currency volatility, unworkably high interest rates and restrictions on imports. The three fields, earmarked as the economic growth drivers, can navigate around these constraints with much ease.

The IT sector, primarily dependent on brain power or technology, a laptop or desk top computer and a connectivity network, has the potential to yield results on a fast track.

Agriculture, also primarily driven by manpower blended with skill and management development, logistics, technology and mechanization, has the potential to be a success model and deliver results in medium terms.

Both in IT and agriculture, the investor can reap the benefit on investment reasonably fast with limited exposure to risk on investment.

Whereas, Mines and Minerals is a long-term and a very serious commitment with the business life-cycle running into decades. The sector is equally challenging to the investor and the government. The investor in this sector looks into a long-term perspective on sustainability of return on investment and security of investment.

The security aspect takes into account the country’s risk related to political and fiscal stability, credentials of the country’s legal system and framework, dispute resolution and arbitration framework, security of men and material and government policy framework. The government needs to work on it to gain investors’ confidence.

The foremost challenge for the government is to build its in-house competence structure to manage mega projects of multiple global dynamics and intricacy.

The past experience of the governments rushing into surfeit of Independent Power Producers (IPPs) without building or acquiring the required competence to effectively deal with the investor’s team of legal and technical experts has landed the country in a disadvantageous position.

This profound downside has badly compromised government’s ability to carry out contract negotiations and agreement structuring to its own advantage or benefit.

Successive governments are therefore suffering for years in the shape of an unsustainable circular debt with capacity payments to IPPs as one of the major irritants. Further, the regulators that the government installed to regulate the oil and gas and the power sectors could not come up to the mark to close the initial gaps and effectively regulate the sectors in public interest.

The competence level required in mineral and mines at the negotiation, implementation and regulatory stage is far more intricate and demanding than experienced in the energy sector.

The experience of Reko Diq project spinning out of control and landing at an overseas court of arbitration, which was decided in favor of the investors with considerable costs, speaks for itself.

While the government must vigorously pursue the said three fields, the economic and fiscal vulnerability of the state due to infirmity of the basic economic fundamentals is so delicately balanced that it demands immediate measures and cannot be ignored.

Only can the required necessary redressal actions lead the nation to ambitious initiatives in IT, Agriculture and Mines and Minerals.

Copyright Business Recorder, 2023