Foreign investment, among other things, is generally aimed at providing service for the national economy or contributing to development or improvement thereof and creating opportunities for employment of local manpower and training them for gaining skills and experience.
Unfortunately, however, investors, both domestic as well as foreign, have all along complained about a serious lack of consistency in government's economic policies. Previously, the changes emanated with change of governments. But now litigations have become the new norm.
Duly signed and executed contracts on behalf of the sovereign are being challenged, years later, which is bound to further pollute the investment climate in the country. Foreign investment is highly important to any country like Pakistan not so much for the financial flows it bring but for the spill-over effects in terms of know-how and access to export market, among other things.
Valuation of any business sale is not the exact science as mathematics, according to 11th-12th century sage Imam Ghazali, is the only exact science. It is a judgemental view of the future price discounted at present value. Furthermore, the seller just does not look at the price factor alone. Once the two parties involved in sale and purchase, take mutual decision to sell or buy, they hire outside expert advisory to undertake financial, legal, taxation and the product market study assessment. And, a collective decision at the board of directors level is taken to proceed with a transaction. Based on how the cookie crumbles in future a windfall may accrue to either the buyer or a seller, as the business cycle wave surges or ebbs. It is the timing and the opportunity which determines the winner.
Those who bought banks when the economy was in a downturn and sold when it had peaked are the few lucky ones. As a case in point a local bank was bought by a Middle East group at $12 million from a local investor in 1999. The same bank flourished and was sold in 2007 for over $500 million to another overseas bank. One of the most prominent sovereign funds bought a local bank when the business cycle was at its peak. Since then the losses have been piling up, so that it was forced to pour money into the bank's capital. As such, it is highly unfair to challenge a business transaction on the basis of 20:20 hindsight.
A government-held oil concession in Badin was sold to a UK-based company, under the privatisation programme, on a valuation of $30 per barrel future price-discounted to the present value of $21 per barrel. No one at that time could imagine oil would go up as high as $140 a barrel in August 2008. Now a fresh transaction is taking place of the same oilfield. It will be conducted professionally by both the seller and the buyer and it is best to leave it to the respective board of directors involved in the transactions. A monkey spanner by way of litigation, thrown in to the court, further sours the existing poorly viewed investment climate of the country.
Another eye-sore is the Gwadar Port project. Governmental change does give an opportunity for the new provincial or federal governments to examine whether due process was followed in a transparent manner in the award of a build, operate and transfer contract to a Far East port operator.
Violation, if any, can be on the part of the local authorities. But throwing up the whole deal into question on spurious grounds is undesirable. Involving the Supreme Court once again sends a wrong signal to the investor class.
Pakistan lacks the financial resources, human expertise, skilled manpower and the technology for highly capital-intensive long gestation projects. That is why we seek help from multilateral institutions not only for funding but also for expert advice. In the end it is a judgement call of the people at the helm to accept or reject the advice. But to question sealed, delivered and executed transactions, backed by the federal or provincial government of the day since the progress has not materialised, as was originally envisaged, needs a deeper probe at the level of experts and not through the courts.
Certainly punish those who have damaged national interest to avail a few pennies for themselves. But that is a job of law enforcers assigned with the task of catching white-collar crimes. Public Accounts Committee of the Parliament and judges are dependent on investigative skills available within the executive branch. If the investigators choose not to do the task assigned honestly and diligently or they are found genuinely handicapped on account of lack of required tools or expertise to perform the task - nothing worthwhile will emerge other than giving the country a bad name. If investors remain shy - meeting the employment needs of a growing population will remain a distant dream. The excesses of irresponsible litigations are luxuries, which we can no longer afford.