Security concerns hampering FDI’

[LahoreEstate]

Staff Report

ISLAMABAD: Pakistan requires a comprehensive strategy to arrest the declining trend of foreign direct investment by restoring investors’ confidence, targeting Asian investors, and sustain public investment, said Special Adviser, South Centre Geneva Dr Khalik A Hamdani here on Tuesday.

Pakistan attracts FDI in the natural resource and energy industries, which were less vulnerable to global downturn compared to investment in the export-oriented sectors. Investment should continue to flow in, said Dr. Hamdani, provided government addresses investor confidence and sustain development expenditure, particularly for infrastructure and education.

“The Ministry of Investment and Board of Investment should target investors from Asia, including the Gulf countries and China,” he recommended.

About ongoing global recession, the Visiting Professor of Pakistan Institute of Development Economics (PIDE), said Pakistan would not escape the global downturn in world trade and investment but the impact on the flow of FDI to Pakistan should be less severe as compared with other countries.

He said that the policy framework attractive to FDI and cost of doing business is high but is still competitive in the region. Domestic private sector is uncertain about country’s investment environment and more than 3/4th of the respondents (out of 110 firms) were willing to invest in next two years. However, investor concerns like law & order, political uncertainty, energy deficiency, high cost of operations and infrastructure bottlenecks were still hampering investment in the country. The expert during his lecture stressed for targeting investors through provision of basic infrastructures including power, gas and other basic requirements for setting up of industrial units. Through these steps, he said the investors would be encouraged to reinvestment both horizontally and vertically. Support services for domestic enterprises should be initiated. He said that 75 percent SMEs in Gujranwala had never applied for bank loans. Due to frequent power break down, he said that about 62 percent of Gujranwala manufacturing units could not have own power generation and shut operations during power outages.

For sustain public investment, infrastructure, education and health should be the priority sector for the government. He also stressed that industrial policy should promote competitiveness. The government should avoid privatisation of public entities at through away rates, although privatisation is essential for development.

Answering a question, Hamdani said that technology up-gradation was important particularly in services sector and it came through technical assistance. He claimed that developing textile city was good idea for attracting FDI in the country.

Speaking on the occasion, the BOI Secretary, Tariq Puri said that the impact of the global downturn was already being felt but foreign direct investment had so far been resilient and the government is ensuring that Pakistan remained attractive.

http://www.dailytimes.com.pk/default.asp...2009_pg5_8