Investing in Pakistan: what are the issues?

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ISLAMABAD:

In my last few weeks before I relocated from Malaysia to Pakistan, I spent several hours in conversations on prospects of investment by Malaysia in Pakistan, and for that matter, from any other destination.

I spoke with government officials, businessmen, private equity investors, financial consultants, bankers as well as those associated with investment-related responsibilities within Pakistan.

I am sharing some general issues, which apply to prospects of not only foreign investment, but to a large extent, also domestic investment within Pakistan. By no means, this is an exhaustive list.

Property rights

Pakistan adopted a policy of encouraging corporate agriculture about 15 years ago. When I spoke about the prospects of commercial farming with better productivity gains, the first question I received was about property rights.

Does Pakistan offer secure property rights for large-scale land acquisitions and are large land parcels available easily free of encumbrance? The last thing an investor would want is losing capital investment, which is land purchase in the case of agricultural business.

Missing information

After a presentation I made to a group of Malaysian investors and business community where Pakistan’s Overseas Investors Chamber of Commerce and Industry was also present, SME Corp of Malaysia asked a basic question: where Malaysian companies interested in sourcing products from Pakistan can get data about potential companies and products.

In fact, an explicit reference was made of India, for which such information was readily available. It turned out that neither the government nor Pakistani chambers and business associations are equipped with such credible data.

Marketing

Apparently, Pakistan’s government and business associations have not prepared basic documentaries that can introduce basic features of Pakistan’s economy including challenges and opportunities.

While some videos are available that introduce Pakistan’s scenic mountains, investment angle is missing. I could only find videos prepared by the International Monetary Fund (IMF) and the World Bank, which were focused on structural and institutional reforms as per their mandate. In this age of digital media, this rather basic shortcoming is not understandable.

Missing projects

On its homepage, Pakistan’s Board of Investment enlists nine natural resources under its appeal to invest in Pakistan. These include salt, copper, coal, gold, cotton, milk, wheat and meat.

It also mentions some generic reasons like population, economic outlook and geostrategic location for investment in Pakistan. However, well-researched project documents, which can identify demand and commercial opportunities, are not available.

Investors need to be ready to act on intelligence before considering moving their capital.

Political stability

Pakistan has achieved considerable stability with successive democratic changes over the last decade or so. However, the common perception is contrary.

Investors still look at Pakistan as a country where frequent government changes and military intervention are a norm. On a positive, they view Prime Minister Imran Khan as a sign of positive change where economic governance is improving.

India factor, negative experiences

Pakistan has not gone into a full-scale war with India for the past 50 years, yet the common perception is that it is a country in constant conflict with one of the world’s largest economies.

Potential investors would always ask existing investors about embarking on in a new destination.

While the presentation by the Overseas Investors Chamber of Commerce did communicate that multinationals present in Pakistan have increased their investment considerably, many of the past investment transactions between Malaysia and Pakistan have not been successful. These include investment transactions in areas of telecom, banking and real estate.

While some of these issues do not have an immediate solution, most of these issues are manageable without spending huge resources. Perhaps, the Board of Investment needs to take a fresh look and redeploy its efforts to exploit the opportunities which Pakistan offers.

The writer is the founder of think tank PRIME and has established a platform to promote Malaysia-Pakistan bilateral investment