ISLAMABAD, Sept 4: World Investment Report 2003, released by the United Nations Conference on Trade and Development (UNCTAD) has mentioned Pakistan among the countries, which have registered positive growth in FDI inflow.

In 2003, WIR notes, Pakistan scored FDI inflow $820 million - 63 per cent more than in 2002, thus parting company with 26 countries of Asia-Pacific region which registered a substantial fall in FDI inflows.

The report, however, ranked Pakistan at 129 among 140 countries in the Inward FDI Potential Index (IFPI), based mainly on structural variables which are expected to attract foreign investors.

While several developing countries such as Guyana, Lebanon and El Salvador were listed among the largest gainers in the IFPI as compared to 1988-90 and 1993-95 indices, while Pakistan emerges in the league of the largest losers including the civil war-torn Zimbabwe, Indonesia, Kenya and Paraguay.

In the first potential index, Pakistan was ranked as 92 which dropped to 133 in the second index and 1999-2001 IFPI depicts Pakistan as having plummeted by 37 points — above only 11 countries.

In Islamabad, the WIR was released at a press conference organized by the United Nations Information Centre (UNIC).

Mr Fasihuddin, former adviser to the finance ministry elaborated some of the significant findings and observations of the Report.

He noted that Pakistan has fared hardly better in the Inward FDI Performance Index also provided in WIR. There, our rank is 116 among 140 countries. This index ranks countries by the FDI they receive relative to their economic size, calculated as the ratio of a country’s share in global FDI inflows to its share in global GDP.

Decline in global FDI flows during the preceding two years is what characterises the trend. In 2000, FDI inflows plummeted by 40.9pc and further by 21pc in 2001. Last year’s total $651 billion was just half the record volume of 2000, observes UNCTAD Secretary-General Rubens Ricupero in WIR.

With its enormous potential to create jobs, raise productivity, enhance exports and transfer technology, he remarked, FDI was increasingly recognized by the countries as a vital factor in the long-term economic development of the world’s developing countries.

While spotlighting the situation in various regions and within those regions various countries, it identifies the factors underlying the downturn.

Among the factors blamed for this in WIR are the slow-down of mergers/acquisitions (M/As) which in turn sapped the confidence of the public and spelled economic decline of the US.

Another result, which is not mentioned in WIR and by commentators from the orthodoxy is that the M/As were followed by retrenchment of millions of workers in the affected industries, giving rise to widespread unemployment, drop in the incomes of middle class and poverty and deterioration of terms of service of the employed in developing as well as developed countries.

The UNCTAD chief, however, projects better prospects for 2004 — contingent, again, on the economic recovery of USA and European Union. But it is China which is seen on all hands as sucking the most investment, thus leaving less and less for other candidates over the foreseeable future.

Even where FDI inflows did go up, these were meant to exploit the energy and other natural resources and very little for establishment of manufacturing facility that might have created new jobs on a sustainable basis.

Although Pakistan was among 87 out of 195 countries which saw an increase in FDI inflows, it is also bunched with the countries that are consistently under-performers in the WIR.

Mr Fasihuddin, speaking of the prospects for Pakistan, was of the opinion that the privatization of such mega projects as PSO, PTCL, etc., would not create new capacity and jobs. It would mean only change of ownership, he remarked. Moreover, the privatization had so far transformed public monopolies into private monopolies and did not result in the expansion of employment opportunities.

Moreover, the privatization would mean that the liquidity of the private sector would be consumed in purchase of existing assets, instead of creating new assets.

A large number of countries have entered into bilateral and regional investment agreements in recent years. The number of such agreements increased from 385 in 1989 to 2,181 by 2002.

Mr Fasihuddin, however, noted that Pakistan had not concluded any such agreement so far to attract FDI. The few agreements entered into so far are in the nature of concessions such as most favoured nation, etc. Pakistan should pay attention to this, he added.

WIR has, however, paid attention to this aspect in the perspective of the development needs of the countries concluding such agreements in view of their likely impact on their ability to pursue their own potentials and goals.

“Whether, how and where governments negotiate investment agreements is, of course, their own sovereign decision. But if such agreements are negotiated, the need to reduce poverty and stimulate development should take a central place as a guiding principle of such negotiations,” says WIR.