The formation of the Special Investment Facilitation Council (SIFC) — a ‘hybrid’ civil-military forum created to attract investment from the Gulf countries — anticipates the civilian leadership’s failure to ensure policy predictability, continuity, or execution. At the same time, the initiative has “institutionalised” the army’s increasing role in the country’s economic decision-making.
The government had rushed a bill through the parliament to amend the Board of Investment (BoI) law last week to provide a legal cover to the initiative, which was termed by the political and military leadership as a ‘bigger’ economic project than the China Pakistan Economic Corridor (CPEC) at the time of the creation of the SIFC in June as part of the new economic revival plan. The SIFC will serve as an interface for investors and remove all the bottlenecks to investment with the help of the army.
The army will have a significant role in the new council, with the army chief being a member of its apex committee along with the prime minister. An army official will act as the director general of its executive committee and its national coordinator. The body’s implementation committee will also be headed by an army officer.
Prime Minister Shehbaz Sharif said the body reflected a “unified approach” to steer the country out of the economic crisis. Apparently justifying the assignment of a key role in the body to the army, he has contended that the initiative represented a “whole-of-the-the-government” approach, set up with a mandate to frame policies to ensure ‘policy predictability, continuity, and implementation’ to revive the economy.
‘There was a lot of pressure from Saudi Arabia, Qatar and the UAE for guarantees for the continuation of policies from the all-powerful army leadinag to the creation of SIFC’
On another occasion, he said that “collective wisdom” was needed to tackle economic challenges. Army Chief Asim Munir has also “assured the army’s all out support to the government’s efforts for economic revival plan, considered fundamental to the socio-economic prosperity of Pakistan.”
Attracting investment from friendly countries remains one of the key goals of the SIFC. The immediate task is to increase foreign direct investment to $5bn and to $100bn in three years, as well as achieve nominal GDP of $1tr by 2035.
According to the statement of objects and reasons, foreign direct investment (FDI) is crucial for economic growth, but Pakistan faces obstacles in attracting significant FDI, including bureaucratic hurdles and regulatory complexities. Comprehensive reforms are needed to simplify regulations, enhance transparency, and foster a business-friendly environment.
To address these challenges, Pakistan’s government formulated an Economic Revival Plan to attract investment from GCC countries, establishing the Special Investment Facilitation Council (SIFC) as a central hub to streamline cooperation with investor nations.
Under the amendment, the SIFC will facilitate investment and privatisation in various sectors, including agriculture, infrastructure development, telecommunication, and energy, among others. It will take all necessary measures to promote investment opportunities and business in Pakistan.
Additionally, the federal government can notify any other area, sector, industry, or project as a relevant field, while the provincial government or an authorised entity can refer sectors or projects to the SIFC for processing under this chapter.
The SIFC has the authority to summon regulatory bodies, government divisions, or representatives if delays in necessary licenses, certificates, or permits hinder investment operations and discourage investor confidence.
Under the amendment, the federal government, based on SIFC’s recommendations, can issue notifications in the official gazette to relax or exempt regulatory requirements for projects, transactions, arrangements, and agreements under this chapter. However, such relaxations or exemptions must comply with the provisions of the respective laws in force.
The bill amending the BoI ordinance says that the SIFC will “facilitate investment and privatisation in areas, including but not limited to defence, agriculture, infrastructure development, strategic initiatives, logistics, minerals, information technology, telecommunication and energy.”
It adds that it will take all measures to facilitate and promote opportunities for investment and business in and for Pakistan.
The SIFC will act as a ‘single window’ for multi-domain cooperation in relevant fields with the GCC countries in particular and other countries in general, for the facilitation of investment and development of an enabling policy environment.
The leasing out of some berths to a UAE company at the Karachi port is the first step. The council will also prepare a long-term roadmap for growth and investment.
The government is also establishing a sovereign wealth fund of $8bn for privatising state-owned entities to provide equity to the SIFC-approved projects for both joint ventures with foreign investors and single ownership schemes.
Many economic analysts point out that the SIFC and the inclusion of the army officers in key roles is a throwback to the National Development Council (NDC) established by the previous prime minister, Imran Khan, with former army chief Qamar Javed Bajwa as a member. Since then, the army’s role in economic decision-making has become deeper entrenched.
“But the army’s desire to dig in and influence economic decision-making, as has been the case in several other spheres of government, is not the only reason for giving it a seat on the table. The politicians’ utter failure to develop a consensus on the basic economic agenda and policy framework has adversely weakened the investor confidence in their ability to ensure policy continuity and predictability,” a financial analyst based in Karachi notes.
Besides, there was a lot of pressure from Saudi Arabia, Qatar and the UAE for guarantees for the continuation of policies from the all-powerful army that their future investments would not face these issues.
“These countries are justified in demanding that the army act as a guarantor due to political instability and poor track record of the politicians to honour the business deals done and investment incentives given by their predecessors after a change in the government,” he said.
The army’s strong representation in the SIFC is expected to help remove such policy uncertainty by ensuring predictability and continuation, political changes notwithstanding, in the future.
Even if the army’s presence on the council helps to bring in Gulf investments, it is not an answer to the long-term, deep-rooted challenges pulling down the economy.
At best, it will provide only short-term relief. For longer term stability, the government must start implementing holistic policy reforms, as done by India in the 1990s. That will preclude the need for such special initiatives as SIFC to provide comfort to investors.
Published in Dawn, The Business and Finance Weekly, August 7th, 2023