President General Pervez Musharraf, while inaugurating Expo 2005 trade exhibition in Karachi, the largest ever held in the country with over 1000 participants from 77 countries, stated that Pakistan was a growing economy, poised to take advantage of its geo-strategic location and act as a hub of trade and economic activities in the region. Such logic has been presented innumerable times in the past; however, it has gained considerable momentum in recent years due to three major factors.
First and foremost, the rate of growth of the economy has risen to 6.7% and is targeted to increase to 7.5% in the coming year. It is, however, unfortunate that the major contributor to this growth has so far not been foreign investment but concessional foreign aid - bilateral as well as multilateral.
Foreign investment in this country has remained low compared to international standards largely due to concerns regarding security, both of investment and the investor, and law and order.
The President was quick to dispel security of investment concerns and appropriately noted that no foreign investment had ever been nationalised in the country, not even during the era of nationalisation ushered during Z.A. Bhutto's period of rule.
In addition, he also noted that the rate of return was high, sometimes as high as 50%. However, the President focused on the cities that are presently the industrial hub of the country as prospective places of foreign investment and added that there were no security concerns in these cities.
While this focus may be seen as an honest assessment of the law and order problems in other areas of the country today, yet it also indirectly reflects the President's awareness that repeated travel advisories in response to the serious law and order problems in some parts of the country by our major economic partners, including the United States, have impacted negatively on foreign investment and have limited the entry of serious buyers of many of our products into the country - buyers who were previously visiting the country with entire teams, including technical staff, who would then identify, for example, the textile designs, that they wanted.
Secondly, the President noted that the development of Gwadar would set the stage for Pakistan to act as a trade hub in the region - from the oil rich Caspian Sea enveloped by several Central Asian Republics and Russia, through Afghanistan to Oman, which is a major international port.
Critics would no doubt argue that the oil wealth of the Caspian Sea would first have to be divided between the countries that envelop it, a division that may be fraught with difficulties, and a modicum of law and order needs to be restored in Northern Afghanistan, an area still suffering from severe socio-political problems, for the benefits to filter to Pakistan.
However, development of Gwadar is a first step in the right direction, and it would create many job opportunities as well as increase economic activity whose benefits would filter down to the poor with a consequent positive impact on extremism and law and order.
Finally, the President also focused on the country's infrastructure, long seen as a major deterrent to investment, both foreign and domestic. He stated that Pakistan is rich in hydel resources, though one would hope that the water resources concerns that the President referred to a day before would be resolved and the neutral mediator to be appointed by the World Bank would resolve the issue surrounding India's proposed Baglihar Dam. He also spoke of the need to build roads, dams as well as have more hotels to attract tourists.
While there is evidence that Pakistan is on its way to economic recovery, especially given the favourable export statistics and the balance of payments situation, yet more needs to be done to attract foreign investment. Legal protection and permission for 100% equity ownership have been given by the present government to foreign investors.
The Expo in Karachi is a first step in the right direction, though it is focused on traders as opposed to investors, as it allows foreign traders to see for themselves the security conditions in the country. Higher exports would automatically translate into more investment in future. However, the government has to sustain this momentum, by tackling all issues that are impacting on foreign investment, in order to ensure that flows into the country become significant.