Cultivating business-friendly environment must to foster FDI

FDI figures have been showing a gradual increase, thanks to endeavours of newly-formed SIFC

ISLAMABAD   -  Though Pakistan has been making efforts to attract for­eign direct investment (FDI), these endeavours have only looked for immediate gains rather than ensuring sustain­able, long-term growth in the investment environment.

According to the United Na­tions Conference on Trade and Development (UNCTAD), de­spite a global decline of 12% in FDI in 2022, with developed economies facing the brunt of this downturn, Pakistan re­mained resilient in attracting foreign investment during the year. However, according to data released by the State Bank of Pakistan (SBP), the country witnessed a noteworthy drop in FDI during the period from July to June 2023, receiving $1.456 billion. This marked a decline of $480 million when compared to the $1.936 billion recorded in the previous fiscal year (FY22). Nevertheless, the FDI figures have been showing a gradual in­crease, thanks to the endeavours of the newly-formed Special In­vestment Facilitation Council.

“Pakistan’s strategic location and burgeoning market present significant potential for attract­ing FDI. However, Pakistan, like many developing nations, faces challenges in fostering an envi­ronment that consistently at­tracts and retains investment,” pointed out Muhammad Jah­anzaib Khan, Deputy Chairman of Pakistan’s Planning Commis­sion. Talking to WealthPK, he said to fully harness the poten­tial of FDI, Pakistan must effec­tively address unique obstacles such as political instability, inef­ficient infrastructure and dire­ly-needed regulatory reforms.

He further said that Paki­stan’s FDI strategy should prioritise sustainable, long-term growth over immediate gains. “This implies giving precedence to sectors with the greatest potential for eco­nomic impact and job creation, such as technology, renewable energy, and manufacturing.” The UNCTAD’s World Invest­ment Report 2023 highlights the challenges faced by de­veloping countries in attract­ing sustainable investments. For Pakistan, addressing the cost of capital and infrastruc­tural deficits is important for becoming more attractive for investments in crucial sectors like renewable energy.

The report’s proposal for a ‘Global Action Compact for In­vestment in Sustainable Energy for All’ holds particular signifi­cance for Pakistan, emphasis­ing the need for national and international policy coordina­tion, financing mechanisms, and sustainable finance markets. Ja­hanzaib added that infrastruc­ture, governance and education served as the foundations of Pakistan’s economic landscape. “The country’s efforts in infra­structural development, partic­ularly in energy and transporta­tion, alongside improvements in governance and education systems, will play a pivotal role in attracting foreign investors.”

He further added that Paki­stan’s geographical position— bordering the economic pow­erhouses of China and India, provides it a strategic advan­tage in attracting FDI. “China-Pakistan Economic Corridor, an integral part of the China-proposed Belt and Road Initia­tive, serves as a prime example of how infrastructure and con­nectivity projects can stimu­late FDI,” he highlighted. “To optimise these investments, Pakistan needs to ensure that these projects are integrated into the broader economic framework, contributing to sustainable development and industrial growth.”

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