Net FDI (foreign direct investment) inflow numbers are clear indicators of a stable environment for investors. High FDI inflows suggest that existing investors are satisfied and that the country’s business policies are favorable, thereby attracting more investment.
Conversely, low FDI inflows indicate a challenging business environment and policies that do not inspire investor confidence.
The 2023 net FDI inflows of 10 African countries surpass those of Pakistan. These include Egypt (USD 9.841 billion), South Africa (USD 5.233 billion), Ethiopia (USD 3.263 billion), Uganda (USD 2.886 billion), Senegal (USD 2.641 billion), Mozambique (USD 2.509 billion), Namibia (USD 2.345 billion), Nigeria (USD 1.873 billion), Cote d’Ivoire (USD 1.753 billion), and the Democratic Republic of Congo (USD 1.635 billion).
In comparison with Pakistan, many countries in its region as well as in nearby regions reported significantly higher FDI inflows last year. Noteworthy figures include India with USD 49.94 billion, Vietnam with USD 36.6 billion, Indonesia with USD 47 billion, China with USD 33 billion, Qatar with USD 29.1 billion, Oman with USD 59.94 billion, Bahrain with USD 6.8 billion, Saudi Arabia with USD 11.4 billion, the UAE with USD 30.7 billion, Bangladesh with USD 3.25 billion, Turkey with USD 10.42 billion, and Malaysia with USD 8.58 billion. Additionally, Central Asian countries like Uzbekistan, Kazakhstan, and Azerbaijan are increasingly attracting FDI, highlighting the disparity.
Over the last 24 years, Pakistan has averaged approximately USD 2 billion in net FDI annually, adding up to around USD 48 billion.
Despite a population of approximately 248 million and a GDP of USD 376 billion, the net FDI for the current fiscal year stood at roughly USD1.6 billion after accounting for outflows. Last year’s net FDI inflow was USD 1.76 billion.
Typically, FDI constitutes around 3% of a country’s GDP. Currently, Pakistan’s FDI stands at approximately 0.6%. This significant decrease underscores the detrimental impact of political instability on investments. Moreover, this situation highlights a complete and fundamental failure of economic policies. To create a more conducive environment for FDI, it is imperative to focus on enhancing political stability, bolstering policy credibility, and honoring contractual commitments.
These strategic measures will play a pivotal role in attracting the much-needed foreign investment and driving economic progress. Facilitating existing investors in Pakistan, both local and foreign, is of utmost importance. Without satisfying existing investors, efforts to attract FDI will not be sustainable. We are trapped in a cycle of ad hoc decision-making and crisis management, lacking a cohesive national strategy, vision, or set of targets.
The Pakistan of Imran Khan differs from that of the Sharifs, which in turn differs from PPP’s and yet again from the military’s Pakistan. While hundreds of policy papers exist, they are rendered ineffective due to short-term thinking. The lack of continuity means that each government’s plan differs, and sometimes even within a single administration, plans change with the appointment of new ministers. This instability and absence of long-term planning prevent the development of effective policies and sustainable progress.
Pakistan needs a “Charter for Business” for the next 20 years, with the same sanctity as that of a constitution. This Charter must be endorsed by the Parliament and the National Security Council, transcending political changes or biases.
It should encompass comprehensive planning, including the perspectives and vision of all stakeholders, covering the investment climate with future projections and allowances for disruptions.
Without a unified country strategy, it is impossible to plan a roadmap for any sector, including education, health, the economy, investment, exports, water resources, population growth, climate, food, agriculture, tourism, and infrastructure. This lack of a country strategy indicates a complete absence of understanding, which equates to incompetence.
The time for decisive action is now! Our current investment landscape is turbulent, posing significant challenges for existing investors. The need is to prioritize transparency over misleading narratives, aiming for an accurate portrayal of our investment landscape.
The State must acknowledge these realities to formulate effective policies. Now is the time for candid discussions and a clear-eyed assessment of the situation.
Muhammad Azfar Ahsan, Former Chairman Board of Investment
