ISLAMABAD, June 3: The government has decided to set an ambitious $4 billion FDI (foreign direct investment) target in 2006-07 and plans various fiscal and non-fiscal incentives for investors to achieve it.

A government official told Dawn on Thursday that budget planners had proposed to the government to improve the investment climate.

He said the investment climate needed to be ‘radically’ improved both by ensuring a better security situation and by providing fresh incentives to investors.

He pointed out that the 2005-06 fiscal was expected to end with $3 billion FDI and said that oil and gas, infrastructure development, communications and the service sector would be major areas for foreign investment next year.

The official said that budget planners had already made a number of proposals to urgently remove infrastructure bottlenecks.

Sources said that a tax reduction of up to 20 per cent might be offered for the first five years of production in industrial units set-up by overseas Pakistanis who would bring investment to the country through proper bank channels.

The Board of Investment has proposed that tax holiday should also be considered for making investment in under-developed areas and priority sectors. The period of tax holiday should be linked to the size and location of investment.

The government plans measures to attract investment from the Middle East in sectors of real estate, hotel, tourism, privatisation programme and infrastructure.

“We see strong interest being shown by the Middle East-based investors in Pakistan. But we need to offer them an adequate atmosphere for making substantial investment,” a source said.

In 2005-06, the source pointed out, the Middle East-based entrepreneurs invested $1 billion in Pakistan, excluding the payment for PTCL shares.