AMONG all the themes that Prime Minister Imran Khan touched on during his visit to Malaysia, one deserves careful attention. Aside from his usual list of topics, from aggressively pursuing corruption cases to curbing money laundering, there was a new emphasis on facilitating investment in the country as a way to promote growth. The new emphasis on investment ought to be welcome in an economy that counts consumption as its main engine, and Pakistan’s investment rate has bottomed out in the past decade. Until this is changed, no amount of economic growth will help to lift the country out of its cycle of balance-of-payments crisis.
The only question that is left to answer now is how the new government intends to go about this mammoth task. Even though he spoke in Malaysia, Mr Khan did not focus solely on foreign investors. He pointed towards his new chief at the Board of Investment as somebody whom he is counting on to create an environment that is conducive for business for both local and foreign investors. That same chief, who is a former World Bank staffer, has constituted a committee to generate proposals on how to improve Pakistan’s standing in the Ease of Doing Business indicators, and is seeking input from private-sector parties across the board. This is a good place to start, but as time goes on, far more is going to be required. For investment to take off, the savings rate needs to be raised, documentation of the economy needs to be advanced, banks need to be encouraged to venture into areas like agriculture and small- and medium-enterprise lending, and proper coordination developed with provincial governments on matters ranging from tax reform to land acquisition. On top of this, a strategic overhaul of tax policy is needed, as is the introduction of a trade and industrial policy.
This is just a small part of the spectrum of priorities that need to be addressed in pursuit of this goal. Otherwise, the government can focus its energies on generating interest in a few big-ticket investment deals through structuring incentives in a way that attracts international investors. Something along these lines was tried during the prime minister’s visit to the so-called investment conference in Saudi Arabia last month. If Mr Khan’s stated intention in Malaysia is to be taken at face value, then he has identified for his government a sprawling and ever-growing mission. The target is the correct one, but there should be no illusions about how much momentum will be needed for the effort to be credible and sustainable. If this is truly going to be the last IMF programme that Pakistan signs onto, as the prime minister claims, then working on this broad agenda will be crucial.
Published in Dawn, November 23rd, 2018
