Most foreign companies in Pakistan aspire to deepen their footprint by reinvesting a part of their earnings in expansion of their businesses. But their performance and the conduct seem unlikely to motivate new investors to enter a troubled country with a promise of high returns.

The chairman of the Board of Investment (BOI), however, is not worried. He foresees a change in the attitude of global investors as soon as the community of local businessmen energises to pull up the investment-to-GDP ratio.

According to the Pakistan Economic Survey, the investment-to-GDP ratio plummeted to mere 14 per cent in the last fiscal. According to IMF data, it was 35 per cent in India, 26 per cent in Bangladesh, 33 per cent in Iran, 31 per cent in Sri Lanka and 22 per cent in Vietnam in the year 2013.

“We are committed to tackle the challenge of restoring investment confidence head on by making the business climate irresistible for entrepreneurs,” Dr Miftah Ismail, an economist and a businessman who is currently heading the BOI, told Dawn over phone from Islamabad. The CEO of Ismail Industries, which owns the CandyLand brand, was appointed to the post by Nawaz Government in early January 2014.

“It would be lame to expect foreign investors to commit capital when locals are being shy. There are many issues that we need to settle for the investment graph to move in the desired direction. We hope to improve the investment-to-GDP ratio to 16 per cent in the next fiscal 2014-15 year,” he said.

“Let the local business community express their confidence in the country and in its current leadership by committing their capital in a big way. Take my words. This will be followed by a surge in foreign direct investment (FDI),” he assured.

“By the end of the current term of the PML-N government, FDI inflow per annum should be in the vicinity of $7.5 billion,” predicted Dr Ismail, while noting the surge in foreign portfolio investment in the capital market.

Positive sentiments of the business community got a boost with the transfer of power from the PPP to the PML-N after elections last year.

The Overseas Investors Chamber of Commerce and Industry (OICCI) launched its flagship ‘Perception and Investment Survey’ last week, which substantiated the impression about the mindset of the country’s most influential business lobby.

According to data in the said report, the total paid up capital of 94 OICCI members adds up to Rs552 billion. Their gross revenue is reported to be Rs2.4 trillion. Collectively, 138 members generate public revenue of Rs724 billion in taxes and other provincial and federal levies. The total value of assets of 138 OICCI members is projected at Rs6.1 trillion.

The stellar performance in Pakistan of FMGCs likes Unilever and Procter &Gamble ; and beverage firms Coca Cola and Nestle; oil marketing companies Shell and Caltex; chemical and electronics giants like Berger and Siemens; telecommunication big shots like Telenor; and financial services institutions such as Standard Chartered etc. are too good to ignore.

Little wonder then that 30 per cent of the businesses covered in the survey projected investing $25-50 million or more over the next five years.

“Improved perception is due to the fact that foreign investors have done very well in terms of their bottom lines, as per listed companies’ published reports. Although respondents have indicated fresh foreign equity injection for expanding their business, a majority of them intend to finance new investments from retained earnings,” said the report.

The OICCI survey confirms that despite weaker macroeconomic indicators as compared to other regional countries, Pakistan offers a comparatively more hospitable business environment to foreign companies.

It explains why, in the current survey, all existing foreign investors in the country expressed their commitment to continue, while over 60 per cent were inclined to expand and 43 per cent indicated they will invest more over the next three years than they did during the same timeframe in the past.

FDI in Pakistan, after discounting the impact of multiple challenges to business environment, is low. For the past few years, it has been under much below one billion dollars annually, against the projected potential of eight billion dollars. Last year, FDI was close to $30 billion in India, over $100 billion in China and about $23 billion in Vietnam.

According to the current Pakistan Economic Survey, the country received $853 million in FDI during FY12-13, an improvement over the year before when it got $658.2 million.

Security and energy continue to top the list of challenges identified, but the order of concerns has changed in the two years when the last such exercise was conducted. The rupee’s devaluation has emerged as a major risk, replacing political instability for the third place in the chart. In 2013, policy implementation and the cost of doing business occupy 4th and 5th position, in the place of inflation and policy implementation in 2011.