Prime Minister Shaukat Aziz held a breakfast meeting in Brussels with businessmen from the Walloon region on Wednesday, where he tried to explain to them why Pakistan is a good place to invest in trade and industry. Aside from pointing out that the country "has a high urban concentration with a growing middle class needing more consumer goods such as automobiles and other appliances," he told them it offers a number of incentives to foreign investors.
Recounting some of these, he said that they have complete freedom to bring in and take out capital, hold hundred percent equity or to create linkages with local partners, and get a low customs tariff of weighted average of 12 percent only.
These incentives have been on offer for quite some time, yet the country has failed to attract foreign investments in a big way. People from abroad are mostly interested in buying the well-established public sector entities that are being privatised.
Such investments do bring in fresh capital, but they are not helpful to the country's overall developmental objectives, particularly its pressing needs vis-a-vis employment generation and poverty reduction. Foreign capital inflows would be much more welcome if they go into the setting up of new enterprises.
However, despite a number of attractive opportunities that have become available to foreign entrepreneurs in this country, not many have come forward to benefit from them. And those who have ventured into the field have learnt, to their dismay, that things on the ground are a lot different than they are on paper.
The Prime Minister informed his audience in Brussels that our large workforce could be utilised at low cost for optimal production and business outsourcing. True, labour is cheap, but the cost of doing business in this country is still very high.
As a report on industrial policy, recently prepared by a special task force, notes prohibitive costs of the factors of production are to blame largely for poor investor response. Energy and transportation costs are not only too high, they are invariably associated with low quality of service.
The report also says that the country's transportation system, including trucking, ports and the railways, is so bad that its inefficiency alone is responsible for causing annual losses to the tune of Rs 320 billion.
The port handling charges here are much above those charged for similar services in the neighbouring countries. All of this, of course, translates into high costs of production, which surely is not an attractive prospect for anyone looking to set up a new venture in this country.
This though is not the only disincentive for new investors. Despite its unquestionable interest in creating an investor-friendly atmosphere the government is yet to find a remedy for red tape that entrepreneurs have to confront at every step.
Formalities that get taken care of in other countries through a simple written request, or even a phone call, take for ever here to be completed unless those desirous of starting new projects are willing to grease palms or they happen to have access to people who matter. All this must change.
The government needs to put in place a mechanism to oversee and monitor on-the-ground difficulties faced by investors so as to provide them with quick redressal. Unless it takes some such measure its efforts to portray Pakistan as a land of rich investor opportunities may remain an empty boast.