FOREIGN INVESTMENT in Pakistan is not picking as the US and western investors continue to shy away due to what is generally believed ‘inconsistent policies and worsening of law and order situation’.

However, some the Chinese investment is coming in roads, ports, corporate farming and diary products. Insiders say that Chinese investment is coming due to political support of the Chinese government itself. But no new US and European companies are coming forward except those who are already operating and plan to expand their activities in Pakistan.

Another reason which is keeping the foreign investors away from investing in the developing countries including Pakistan, is that they are not sure what shape things will take in these countries after the implementation of the World Trade Organisation (WTO) decisions of free global trade by 2005. They are weighing whether it will be profitable for them to make huge investment in setting up of new infrastructure in developing countries or will it be more suitable for them to expand their existing production units and then export goods to these countries under the free trade system.

Overseas Pakistanis had been contacted by the government specially those living in the North America and the Middle East to invest in Pakistan. “Here we are disappointed as our overseas Pakistanis are not coming up to the expectations”, said an important official of the ministry of finance.

He said that now when the government has given assurances that there will no be freezing of foreign currency deposits still expatriates were not taking interest in their own countries to make any investment.

Generally, it is estimated that overseas Pakistanis are maintaining 100 billion cash and other assets and if they decide to even invest 10 per cent in Pakistan, it will make a lot of difference and that the move could attract other foreign investors to come in this part of the world for investment proposes. Overseas Pakistanis have been offered new facilities in the budget for 2002-2003 including baggage concessions but they are not interested in making invest. Nevertheless their contribution to send increased remittances is definitely being appreciated. On the other hand, local investors also continue to feel shy to invest and the trend is being followed by the foreign investors for the last many years with the result Foreign Direct Investment during 2001-2002 totalled $375 million, compared to $322 million of 2000-2001.

The chairman, Board of Investment (BoI), Wasim Haqqie says that there has been about 18 per cent increase in FDI in the last financial year over 2000-2001 which is not all that bad keeping in view the international recession and 9/11 events. He also projects one billion dollar FDI in 2002-2003 as according to him things are improving. “We have worked out all the details to have minimum $750 million FDI if not $ one billion”, he said hoping that major foreign investment will come from the USA and the UK in power, petroleum, chemicals, small and medium enterprises (SMEs), fisheries and agro based industry.

The question, nonetheless is whether investors’ confidence has been restored to expect certain meaningful foreign investment in the country. Minister for finance Shaukat Aziz admits that despite major advances made by the government in creating an enabling environment for the private sector, the process of investment has remained slow. This, he says, remains the concern of the government.

Foreign investment is one of the major factors that generally determines GDP growth rate and if one takes the finance minister’s concern into account achievement of 4 per cent growth rate may not be all that easy during the current financial year.

Officials often maintain that one of the major reasons for not having adequate foreign investment in the past was the dispute with independent power producers (IPPs) which had now been resolved due to present government’s efforts. But the accountability drive, escalation of tension with India, unsatisfactory law and order situation and still high tariff are said to be the issues that are hampering the foreign investment.

It is argued by some concerned officials that unless there is a local investment, foreign investment can not be ensured and in this behalf they regret that the private sector of the country despite having all possible fiscal and non fiscal incentives, is still reluctant to come forward and invest.

“We have removed in this budget and will further be removing various other irritants that had been blocking investment but still the private sector is not very much interested to make new investment”, an official of the ministry of finance said regretting that rent seeking attitude is difficult to change in Pakistan.

Insiders say that the government has been advised by the IMF, the World Bank and the Asian Development Bank (ADB) to encourage local investment which will in fact follow foreign investment. It was also said that reforms in the banking sector and capital market have been accelerated and that constant reform in tax laws and tax machinery should act as major source of comfort to the business community.