LAHORE, Sept 26: Political instability resulting from the 10-month long tussle between the government and the opposition on the LFO and security concerns are hampering investment in Pakistan.

“There is a general lack of public confidence in the political and security situation in this country, preventing private sector from making fresh investment,” the Asian Development Bank country director, Marshuk Ali Khan, told the participants of a seminar on ADB’s strategy for developing private sector.

“ADB recognizes the potential role of the private sector as an engine of economic growth, and thus as a catalyst for sustainable development. But the private sector in Pakistan isn’t playing its role. The real investment (in the country) has been stagnant. The private sector is following the policy of wait and watch. This is something to be worried about,” he said.

He said the “country was awash with liquidity” which was being spent on speculation and not in the “real sector”. It was because the government was stuck up on the LFO issue for 10 months.

As far as foreign investment was concerned, Mr Khan said, “the foreign investment had though doubled during the last fiscal, but it was going into stocks and not in the real sector.” The primary factor (behind the low levels of foreign investment) was the poor country perception of Pakistan with regards to security situation and political instability.

“The government will have to demonstrate stability (to attract local and foreign investment in the real sectors),” he said.

He said ADB had provided the public sector financing in excess of $2 billion for improving the “regulatory environment for the private sector development.”

He listed different programmes launched by the government with the help of ADB to enhance regulatory environment in the country.

“Direct assistance to private sector enterprizes exceeded $241 million to date. In addition to this, complementary loans of over $129 million have been arranged for the private sector borrowers, catalyzing and leveraging its direct assistance. Total assistance to the sector to date stands at $402 million,” he said.

He said ADB’s portfolio of private sector investment comprised loans, equity, and complementary loan investments in 10 companies and financial institutions. In terms of the impact of assistance, he said, over a dozen sectors had benefited.

“ADB has played critical and pioneering role in the setting up of a number of industries in the private sector, including marine terminal, leasing and export finance guarantee,” Mr Khan said.

Earlier, ADB official Robert Bestani talked about initiatives taken by the Manila-based multilateral donor for private sector development in different countries.

Punjab industries minister Ajmal Cheema and finance secretary Salman Siddique also spoke.