Attracting FDI flows
THE very first month of the current financial year has closed on a highly encouraging note in the Foreign Direct Investment (FDI) sector, with FDI flows showing a 129 per cent increase over the same month last year. If the trend continues, there is no reason why Pakistan cannot achieve its FDI target of $3.3 billion fixed for the current fiscal year. The target had looked rather ambitious against the FDI flows of $1.5 billion during 2004-05 and an average of about $650 million a year over the last nine years. But since 2001, when about a little less than $500 million worth of FDI has come in, one has seen a steady growth in succeeding years. However, Pakistan is still in dire need of increased flows of FDIs to sustain the high growth rates that the country has achieved in recent years. Domestic savings rates are still very low compared to the investment needs for sustaining an annual growth rate of even six per cent. So, conditions need to be created for attracting bigger flows of FDI. The fiscal room that has been created following 9/11 has made it possible to introduce all the necessary economic reforms in good time and achieve sustained macroeconomic stability.
It appears that the Board of Investment (BOI) has been able to utilize this advantage by aggressively selling Pakistan to potential foreign investors. In this one must give full credit to the BOI chairman who has made full use of the emerging favourable local, regional and international economic circumstances to attract investment. More than anything else, the foreign investor needs hard and up-to-date information on a country to make his decision. Many times in the past we failed to clinch an FDI deal because of our failure to provide all necessary facts and information. In this area, Pakistan today is better placed and is at par with many regional countries. The BOI’s website is perhaps the most comprehensive among the various websites that government organizations have launched other than that of the State Bank. Where we have lagged behind and which is perhaps discouraging foreign investors to even take a look at the potential in Pakistan is its image and the dismal law and order situation here. The institutions regulating the economic and financial sectors need also to be improved and made more accountable and free from the influence of money and executive authority.
Next, we need to improve the per capita productivity in the country. Our labour is perhaps relatively cheap, but because of low productivity, it is more costly than even its East Asian counterpart. FDI is flowing thick and fast in the region, especially in Pakistan’s immediate neighborhood — China and India. A part of these flows could be attracted to Pakistan by adopting the right regional policies free from the rancour and suspicion of the past. Since 9/11, the economies of the six Gulf Cooperation Council countries have soared. Before 9/11 the oil exporters were investing as much as $19 billion a year in the US. This has come down to a mere $1.2 billion. Gulf oil revenues are expected to reach almost $300 billion this year. A good part of this money could also be attracted here by simply improving the country’s security situation.
Trouble in Russia’s backyard
RUSSIA, which in the Cold War days ruled over a huge land mass, now finds its influence in the area that constituted the former Soviet Union considerably reduced. In the aftermath of the break-up in 1991, Moscow was quick to act and got eleven of the republics in Asia and Eastern Europe to join hands with it under the banner of the Commonwealth of Independent States (CIS). This provided Russia some political and strategic advantages but it now seems that its influence is fading. The trend emerged when the pink revolution in Georgia in 2003 swept a pro-American government into office. Next year Ukraine followed suit and its orange revolution changed the electoral scene and the West-leaning Viktor Yushchenko was elected president. More recently, Moldova re-elected its pro-West ruling party to the parliament. All this has disturbed Moscow, which has, on the eve of a CIS summit on Aug 26, warned that it will stop giving economic aid to these states. The feeling in Russian ruling circles is that all the subsidies they have provided to their erstwhile allies have failed to retain their loyalties. Hence the decision to cut off the aid.
This move is of great significance in international politics. First, it indicates that the underlying idea of America’s Monroe Doctrine still appeals to strategists in other regions as well. Russia considers it important for its security that no foreign influence should be allowed to penetrate its backyard - the former republics of the defunct USSR. Secondly, as a corollary to the first, Russia is now flexing its muscles in a show of force to demonstrate to the United States that the unipolar age of American global supremacy is about to be challenged. As the Russian economy picks up, its interest in international power politics is being revived. The situation is still too fluid. But one can discern several power centres emerging that at the moment are in the process of realigning themselves. The European Union, China, India and Japan have already begun to make their impact felt as major players on the international stage. The international relations of the 21st century will depend on their permutation.
Where are the sisters?
IT SHOULD come as no surprise that four members of a family, including two sisters — Arifa and Saba Baloch — suspected of having been trained to carry out suicide attacks, have been missing since their arrest from Swat on June 4. Post 9/11, the manner in which government agencies have detained suspects is disturbing: it shows utter disrespect for the law which clearly states that even detainees have legal rights. For eight months, agencies denied knowing the whereabouts of the two Afzal brothers but when the men were eventually released in May, the denial proved false. One hopes the same is true for the Baloch sisters who have yet to be produced before a court of law. The girls are said to have received training from their maternal uncle, Gul Hasan, an activist of a banned sectarian group, who has since been charged and sentenced to death for the May 31 bombing at a mosque in Karachi. Whether they were planning a suicide attack is an issue for the courts to decide but in the meantime they need to be produced and allowed access to legal aid and to their families. It cannot be overemphasized that there is a due process of law that must be followed and any breach of it calls for the strictest of actions.
Although cases of mysterious disappearances are now common, the court needs to take serious notice of the impunity with which people are detained. If enough ‘pressure’ is applied, the Baloch sisters may eventually be produced and given a fair trial but that is not the answer to the problem of arbitrary arrests and detention. The agency or agencies responsible for any illegal detention should be taken to task so that this menacing practice is abandoned and proper respect is shown to a citizen’s rights under the law.