Increasing exports and attracting foreign investment are decades-old challenges for Pakistan. Rate cuts by the monetary policy committee might create some slight breathing space for local businesses but do little to attract investment in a country that is plagued with a series of ease of business issues that are known to all.

In its recent report, “Efficiency-Seeking FDI in Pakistan”, the Pakistan Business Council outlines the need to pivot from the current market-seeking FDI to efficiency-Seeking, export-oriented FDI. The huge middle-income class has attracted companies that feed into the consumption-oriented economy, not businesses that promote exports. This has led to short-term gains but not broad-based economic growth, especially since inflows are offset by profit repatriations, dividends and royalties.

Efficiency-seeking FDI leads to fresh new investments and helps the country move up the value chain. It is also hard very hard to attract. Despite the promises of CPEC and the possibility of integrating into the logistical chain of the export juggernaut China, Pakistan has struggled to match its peers in attracting investment. “Leveraging success stories from countries like India, Bangladesh, and Vietnam can help Pakis­tan optimise its FDI strategy that yields long-term economic growth,” states the report.

Published in Dawn, The Business and Finance Weekly, November 11th, 2024