-Editorial
WEB DESK: According to a section of the press, Prime Minister Nawaz Sharif has ordered a massive restructuring of the Board of Investment (BoI) due to his dissatisfaction with the inflow of foreign direct investment (FDI) as well as domestic investment.
There is statistical evidence that supports the Prime Minister's viewpoint: overall FDI plunged by a whopping 55 percent during July-February 2015-16 to $405.5 million in comparison to $898.3 million in the comparable period of the year before. There has been a rise in FDI since due to the inflows under the China Pakistan Economic Corridor (CPEC) - inflows that are set to rise this year as other projects reach a financial close. Investment as a percentage of Gross Domestic Product (GDP) rose to 15.2 percent (July-March) in 2015-16 according to the Economic Survey which compares unfavourably with the rate during the last full year during the tenure of the PPP-led coalition government notably 17.1 percent in 2011-12.
The Prime Minister's concern focused on funding regional BoIs which are duplicating the efforts of the provincial BoIs at great cost to the taxpayer. According to an official, regional BoIs are functioning at a cost of Rs 80 to Rs 100 million per year and their output is almost non-existent for the simple reason that its functions are being carried out by provincial BoIs.
In this context, it is relevant to note that the Sindh Board of Investment (SBI) chairperson Naheed Memon recently appreciated the decision of the federal government to sanction 3.5 million cubic feet of gas per day for Khairpur Special Economic Zone (KSEZ) and maintained that the decision would build trust between the federal and the provincial government. Her appreciation follows criticism in June accusing the federal government of violating the Special Zones Act 2012 by approving new SZEs in Punjab without providing utilities to the already approved zones in Sindh.
Be that as it may, there are many who question the performance of BoI last year? According to the Economic Survey, the BoI together with provincial boards of investment organised a Pakistan investment conference in November 2015 "to enhance confidence of investors and other economic agents in the country" which provided a "great opportunity to 650 foreign and local businessmen and investors of 29 participating countries to gather information and interact with each other to explore joint venture business and investment opportunities."
The relevance of BoI cannot be underestimated as there is a need to fuel foreign and domestic investment in Pakistan which in turn would not only increase productivity but also provide greater employment opportunities.
Pakistan has a well formulated FDI strategy as well as an investment policy which highlights special programmes that "promote linkages between domestically and foreign-owned private enterprises such as local supplier, sub-contractor or joint venture programme," as per the Economic Survey, however, our business climate remains poor and this in spite of the formulation of a new business climate reform strategy adopted in February 2016.
The government, in the last Letter of Intent submitted to the International Monetary Fund under the $6.64 billion Extended Fund Facility acknowledged that there are "barriers to new business start-ups, impediments in the legal framework for creditors' rights and contract enforcement, complex legal, taxation and border trade requirements and limited access to finance."
To conclude, one can appreciate the government's efforts to improve the investment climate as well as the Prime Minister's directive to BoI to "re-examine the utility of its regional offices afresh and resubmit a case" before 23rd August may not only generate savings but also re-energise the BoI to improve its performance.
Source: Business Recorder
