ISLAMABAD, Jan 13: The government has finalized a draft of the "Model Agreement on Promotion and Protection of Investment" which is likely to be approved by the federal cabinet in February to help attract the much needed foreign investment.

Informed sources told Dawn here on Thursday that the draft of the model agreement had jointly been prepared by the Ministry of Privatization and Investment and the Board of Investment (BoI) and was currently being vetted by the attorney general of Pakistan.

The ministry of law has approved the draft that assured the protection of foreign investment by allowing the investors to seek international arbitration in case of any dispute.

The sources said that Pakistan had been urged by developed countries to ensure effective and transparent judicial system. They also wanted the government to improve the security environment for luring foreign investment in this part of the world.

The complete dispute resolution mechanism has been provided in the proposed model agreement with a view to provide level-playing field for all the investors. "This model agreement will serve as a confidence building measure (CBM) assuring the investors that there will be no unjust act on the part of the state", a source said adding that the model agreement would be a legal document available to the investors.

It would ensure that there was no discrimination against the investors and that in case of a dispute they would be allowed to seek international arbitration at various international forums including International Chamber of Commerce and UNICITRAL of the United Nations.

The sources said that the attorney general of Pakistan wanted to have "minimum risks" in case any foreign investors invoke the arbitration clause. The increasing financial claims against the state, sources said, could harm the economy, therefore all the aspects of the model agreement were being examined by the office of the attorney general of Pakistan.

"Currently various dispute cases amounting to $850 million are pending against Pakistan by the investors", a source said adding that the amount of cases was equivalent to last year's foreign investment in Pakistan.

He said that the government wanted to greatly facilitate the investors but at the same time wanted to reduce the potential risks coming in the shape of disputes.

The sources said that United States, Germany and Finland were particularly calling for early finalization of model agreement so as to protect their investment in Pakistan.

While the United States, sources said, was insisting over the issue of Intellectual Property Rights (IPRs), Finland was not encouraging its investors to go to Pakistan in the absence of a model agreement.

M/S Nokia of Finland, sources said, has expressed its willingness to expand its operations especially by establishing its factory in Pakistan during 2005. However, the company has asked its government to first get a model agreement enforced by Pakistan with a view to protect its investment which could initially be in the range of $200 million to $300 million.

The sources said that foreign investors were calling for "rationalization and expropriation" by Pakistan over the issue. And if that was not done, investors maintained, it would be difficult for them to make investment in the country and that this issue should adequately be addressed in the proposed model agreement.

Foreign investors were looking for decent profit, dividend and repatriation of their investment and expressed hopes that these issues were fully taken into account by the Pakistan government. Pakistan has so far signed 46 bilateral agreements with different countries. The first such agreement was signed in November 1951 with Germany.