ISLAMABAD, Nov 3: Political instability, unsatisfactory law and order situation, red-tapism and bureaucratic snafus are major hurdles in the way of attracting considerable foreign direct investment (FDI) in Pakistan, says a new study.

The study, jointly conducted by the Board of Investment (BoI) and the Japan International Cooperation Agency (JICA), said that factors impacting the FDI needed to be looked into seriously by the higher authorities.

"As a consequence of political instability, the law and order situation in the country suffered," said a feasibility study that has mainly been conducted about the seafood industry in the country.

It said that rapid changes in governments resulted in new policies being announced before the old policies had time to deliver. Stability in the government has resulted in stable policies.

"Red-tapism and bureaucratic snafus do exist in the country," the study said. However, in an attempt to overcome this failing, the government has made concerted efforts to attract management skills and know-how from the private sector into its various key ministries.

Also, it pointed out, Pakistan lacked in the area of infrastructure where land and power were expensive. The study, however, appreciated various efforts of the government in order to boost investment. For example, the government has allowed investors to invest without obtaining permission from specified agencies related to the industry concerned. This has been done with a view to help ease the entry of a foreign investor into Pakistan.

Pakistan has been making efforts to attract FDI and such efforts have been intensified with the advent of deregulation, privatization and liberalization policies adopted by the government.

The total investment, the study said, had shown a marked improvement in the medium-term rising to 16 per cent of GDP during 2003-04. The manufacturing sector remains the most attractive for investment and attracts the largest share of FDI in the country today with 25 per cent of total investment brought into the country moving to this sector.

Pakistan is moving rapidly to enhance its infrastructure and develop its unutilized natural resources of power. The power and oil and gas sector attract 22 per cent and 20 per cent investment, respectively. Information technology (IT) and telecommunication has also currently become an attractive avenue of investment.

Talking about seafood, the study said that there was an ample need of modern fish processing units that could add further value to the fish catch yielding products like breaded buttered shrimps, fish fingers, fish cakes, fish paste, fish sauce, etc.

The study said that the Gwadar Port had certain shortcomings in infrastructure, the most important being the current unavailability of adequate supplies of water to meet the processing needs of the fish processing industry. At present brackish water is available which is unsuited to the needs of the industry. However, desalinization plants are being constructed to address this issue.

The second shortcoming is incomplete road links to the major economic and industrial zones of the country which have yet to be completed. Like roads, rail link is also awaiting completion.

The scope of the Gwadar project undertaken by the government also includes the construction of three roads which would connect Gwadar-Karachi, Gwadar-Rattodero to Sindh and Punjab, and Gwadar Quetta.