KARACHI, Oct 9: Companies investing in Pakistan want the new government to accelerate economic reforms and improve security, said the head of the country’s main foreign business organization on Wednesday.

“If the new government goes for populist policies that reverse some of the corrective economic measures taken by the current government then that would be a wrong signal,” Kamran Mirza, president of the Overseas Chambers of Commerce & Industry (OCCI), told Dow Jones Newswires in an interview.

At the very least, said Mirza, the current momentum of measures to bolster the economy and open it to further foreign investment must continue under the new administration.

After three years of military rule, Pakistan’s 81mvoters go to the polls on Thursday to elect a new parliament, which in turn will elect a new prime minister.

The election is viewed as a crucial litmus test of the country’s move towards democracy after General Pervez Musharraf seized power in a bloodless coup in October 1999.

On the economic front, the current Musharraf-led government has won plaudits from international investors for floating the Pakistan rupee, strengthening the banking sector and partially deregulating the oil industry — steps which allowed the IMF to resume lending.

Mirza believes that even if the outcome of the election is well-received by the international investment community it is unlikely to trigger a wave of new foreign direct investment, at least in the short term.

In the near future, at least, investment is likely to be driven by the multinational companies already operating in the country rather than new entrants, said Mirza. Despite stellar improvements in some economic indicators, foreign investment remains weak. Pakistan’s image as a political powder keg resulted in a mere $480 million in direct investments in the last financial year, ending June 30, 2002.

The OCCI chief acknowledged that attacks on foreigners since the start of the year — in protest against the US-led military action in Afghanistan — has hurt investor sentiment in Pakistan. “For this reason, the new government must vigorously purse tackling the security issue,” he said.

The 183-member OCCI is the biggest forum for foreign companies in Pakistan, with around half of its members US and UK firms. The combined revenues of OCCI members account for around 9 per cent of Pakistan’s gross domestic product, and a fifth of the country’s tax revenues. Among multinationals with sizable investment in Pakistan are Unilever, Royal Dutch/Shell Group’s (RD) and Imperial Chemicals Co.

Mirza praised the outgoing government for implementing remedial measures over the past three years to spur an economy that was stagnating in the early 1990s.

Most of Pakistan’s leading indicators have improved dramatically. Inflation of around 3 per cent is at a two-decade low, enabling the central bank to significantly loosen the monetary reins. Boosted by strong remittance inflows and foreign development aid, the Pakistan rupee has gained 8.5pc against the dollar over the past year. Meanwhile, foreign reserves are at a record $8bn — a threefold increase from the level three years ago when Musharraf seized power.

The government expects the economy to expand 4.5pc in the current financial year to June 30, 2003, up from 2.6pc last year. In the next fiscal year, the government is pencilling growth of around 5pc. The IMF projects growth of 4.6pc in the current fiscal year and 5pc in the next, while the ADB is forecasting 4.5pc and 5pc, respectively.

Mirza believes that if the economy can maintain its edge international investors may be less deterred by the country’s image as an unsafe place to do business. He said areas of potential investment growth are consumer goods, electronics, and especially TVs, which are showing significant growth following tariff reductions, an anti-smuggling drive the rupee’s sharp appreciation.— Dow Jones News Wires