Even the record quantum of $3.5 billion foreign direct investment in the country over the first half of the current fiscal year look measly when judged against the interest shown by the overseas investors in the country during the past week in Davos.
Here 75 of 100 top companies participated at a gargantuan event of the annual meeting of the World Economic Forum that attracted more than 2,000 leaders drawn from across the world from business, politics, academia, the media and civil society.
During the course of the five days January 24-28, aside from formal and informal interaction at planned events a number of corporate heads of giant companies called on the leader and members of Pakistani delegation and divulged their plans to enter the country in a big way or increase their investments manifolds.
On their part the high powered Pakistani officials and delegation leader Prime Minister Shaukat Aziz projected the country as an attractive destination for the world investors looking eastward.
Unlike India, Latin America or currently Thailand which seemed to be selective in extending their support to the flow of international capital, the government of Pakistan scarcely hid its commitment to the liberal economic philosophy that advocates free cross border movement of capital.
In its effort to prove more liberal than the liberal philosophy, they bent backwards in order to accommodate demands of international investors. There are many examples where this attitude was demonstrated. Etisalat deal (PTCL privatization) merit a special mention here.
From the government side, it is argued that flexibility is required to attract funds roaming the world in search of the right investment options. Examples of India and China with more cautious and calculated approach is presented by the critics who feel that the government should negotiate from a position of strength with intending overseas investors confident of rich dividends that the country has the potential to offer.
There is no denying the fact that international companies bring with them modern corporate culture necessary to operate in increasingly globalised world. In countries where foreign investors are encouraged to transfer technology in weaker areas of the native economy, it most certainly has played a very vital role in transforming the work environment and development of both tangible and intangible assets. China is a case in point.
The confidence over the role of foreign investment especially in capital market as a dependable source for development, however, was shaken in mid 90s when footloose foreign capital suddenly moved out of Far East and Asian tigers were left gasping to fend for themselves. It took affected countries about a decade to re-emerge. So a word of caution is not so much out of place in an environment where the government is keen to woo the international capital.
The question is: How much the people, local industry and services sector stand to gain from increased foreign investment? It is too early to comment on that. Much will depend on the quality and quantity of investment, its correlations with existing players and its forward and backward linkages in the economy.
But one thing is for sure that in the absence of correction required to check lopsidedness in the economy growing size will not rectify the inherent structural flaws. The economy is so structured that it rewards the privileged and discriminates against the vulnerable. Besides, negligence of certain high potential sectors such as agro-based industry, shipping, mining, etc. for a variety of reasons has led to waste of country’s precious resources.
With increased foreign investment, the pie will grow larger but will it also lead to increased share to people’s frustration of not being able to share under the current arrangement is hard to tell. A more in-depth study of sectors where investment is coming in and terms and conditions offered to investors is required to make a credible comment on the issue.
In the words of Prime Minister Shaukat Aziz,the world saw Pakistani leadership in action at WEF. All crisp and smart Prime Minister’s performance on stage was strikingly good. The Prime Minister was seen rushing and rubbing shoulders with rich and mighty in the lobbies and lounges of the congress centre. The themes of panel discussions where he was one of the speakers were, however, focused directly on politics. One was on terrorism and the other on the issue of nuclear proliferation.
Notable of those whom he met during his stay in Davos included big wigs such as heads of Bata Shoe Foundation, Gulf International Bank, Artoc Group for Investment and Development, Metro Cash and Carry International, Emirates Telecommunication Corporation, Citibank, Taib Bank, Gulf Investment Corporation, National Bank of Kuwait, Peremba Group of Companies, Hamza Alkholi Group, Xenel Saudi Company, Goldman Sachs International, Dallah Al Baraka Holding Coca-Cola Company and Bahrain Petroleum Company.
He met David Ruenstein, CEO Carlyle Group, a private equity fund, who indicated that the company has planned to set up an office in Pakistan as a part of their larger investment plan worth several billion dollars for the region.
Chairman Nestle also called on prime minister and told him that his company would invest more in Pakistan taking advantage of its investment friendly and liberal economic policies.
Prime minister also held one to one meeting with Robert E Diamond Jr., President, Barclays, UK and Grant Kvalheim, C-President, Barclays Capital, USA. He also met Hans-Joachim Korber, Chairman and CEO, Metro and Thomas M Hubner, CEO, Metro Cash and Cary International. Carlos Ghosn, Chairman Renault, Patric Ceseau, Group CEO, Unilever Food Global also called on the PM and discussed issues related to their business prospects in Pakistan. Charles O Prince and Clark B. Winter threw a reception and hosted dinner for the PM and his team.
There is little doubt that Western governments find Pakistan a risky place. Pakistani businesses spare no chance to list problems they are faced with in conducting their affairs in the country. But the corporate giants looking eastward are charmed by the country’s untapped potential and Pakistan’s accommodating gestures.
Ignoring travel advisories and shyness of local players they find profit margins, liberal policies, untapped resources and growing market reasons good enough to take serious interest in the country. Journalists attending the high-profile economic gathering at Davos could easily conclude that for the private capital seeking destinations, Pakistan is more than just another country in the conflict stricken region of South Asia.