propecia pregnancy

Attracting Foreign Investment

Third World countries blessed with large populations but hamstrung by limited resources must be extremely careful in choosing the direction their economies must take, particularly if they want to attract foreign investment and entrepreneurial skills to bolster their economic threshold and stay ahead of the population explosion. There can be no definitive role model, each nation has different needs peculiar to its relative circumstances, but one thing is certain, the Soviet model of a controlled economy has been a total failure, as exposed in the west by Thatcher’s revitalization of the moribund British economy by wholesale dismantling of the public sector by disinvestment across the board. The COMECON countries are now all following the devolution route that China took in 1979, anathema to socialistic thinking but an economic boon for its consumer-product starved masses. The chief aberration in the obsolete Soviet system was a bureaucratic penchant for central control and organisation, a “guided” method from top to bottom while the basic requirement for economic emancipation of the masses is that while the parameters may be laid out, the free enterprise system envisages incentive, ability and performance for individual as well as collective rewards in an openly competitive environment rather than arbitrary bureaucracy imposed fiat. A genuine free enterprise system attracts external investment by the force of its rewards, with clear-cut profit-motivated objectives.
Pakistan is no different from other countries, though we have been blessed with a strong agricultural base making us one of the very few Less Developed Countries (LDCs) capable of not only feeding itself but having enough left over for cash-rich exports, even then foreign and local investment in industry has been shy in a bearable economic climate. The problem is that while the Government of Pakistan (GoP) has always been desperately looking to attract foreign investment, sending many delegations abroad and espousing various incentives, foreign and expatriate entrepreneurs attracted to the country by such invitations have been faced with the Jekyll and Hyde behaviour of some of our key public servants, afflicted with the worst type of colonial mentality. Expecting an open arms welcome, intending investors have had to undergo an endless odyssey of sorts, not many have survived the Cretan Maze which controls all the utilities necessary to run industry, including the financial sector.

The Secretary of the Board of Investment (BoI), Syed Mohibullah Shah, wrote an excellent theoretical piece for THE NATION defining the thrust of the present government in encouraging foreign investment in Pakistan. An Ivy League Business School model was annunciated by Mr Shah, an Additional Secretary in the PM’s Secretariat, who has also been elevated to the Chairmanship of the Investment Promotion Bureau and thus become the most powerful public servant when related to commerce and industry in Pakistan. Mr Shah was left out in the cold during Martial Law’s long decade, luckily for us his punishment being education in international economics and multi-national business, one of the better privileges of senior bureaucrats being education in places like Harvard, Princeton, etc at public expense. The tenor and depth of the article shows that he has judiciously absorbed the theories annunciated in the western model, however these need to be adjusted to the practical realities in Pakistan. Now at the apex of attracting foreign investment in Pakistan and directly responsible to the PM, the success and/or failure of Ms Benazir’s policies has to depend on his staff work, he has no proven commercial or industrial success in his resume to inspire investor confidence. Reading his articles, one is therefore not concerned about the style but the central thrust of his exposition which (naturally) espouses sanctioning procedure by the BoI in the so-called ONE-WINDOW operation. On the contrary, our failure to attract foreign investment is due to the stifling climate of bureaucratic control which is anathema to free enterprise. Commerce inculcates a practical sense of how to accomplish a difficult task within given financial constraints, artificial bureaucratic restraints destroys incentive and gives a false sense of achievement.

The first pre-requisite of investment is a secure economic environment. At this time, Pakistan is going through a severe transition period of uncertainty, the basic drive (one hopes) remains the same, emancipation of the lot of the masses of Pakistan. Despite the fact that we have had stable economic growth relative to other Third World countries, these cannot be attributed to our “brilliant” economic planners (or Harvard-selected economic models) but mostly due to excellent crop conditions almost through the last decade, high prices for cotton and rice, our main foreign exchange earners. Ms Benazir’s greatest forte is her international credibility and then some. She acts as a strong beacon for foreign investment, the success of her fledgling democracy, albeit in effect for less than 300 days at present, is a motivating factor for entrepreneurs to invest in Pakistan.

Any intending foreign entrepreneur will have already assessed the profitability of his venture. Businessmen seldom put their money for socio-economic reasons, that is the exclusive prerogative (almost) of governments. Potential investors would have done their homework about the profitability of their ventures. Any potential investor would know that his equity would fail to attract the advances/loans from banks and/or other financial institutions, whether public or commercial, necessary to balance his investment. The processing of feasibility reports and subsequent approval by BoI implies that potential investors (whose international financial credibility can be determined within hours by telex and/or fax) may try to sell the Eiffel Tower to Pakistan. The long drawn out processing of feasibility reports prior to sanctioning approval even under the one-window BoI operation is self-defeating, it invites corrupt practices and is a NON-STARTER. In effect the so-called ONE-WINDOW operation consists of a large window from Karachi to Islamabad with many side-pockets. Any average bureaucrat, whatever his level of competence, expertise, knowledge (and intermittent honesty), cannot pass commercial judgement on commercial proposals, not an entrepreneur himself he does not have the penchant to take calculated risks with his own money, no amount of theoretical experience is going to make him into a knowledgeable referee about industrial undertakings. If this were true we would now be espousing and extolling the virtues of the public sector instead of choosing the Thatcherite course of dismantling it and going the highly practical disinvestment route for economic emancipation NOW adopted by Ms Benazir (in utter contrast to the PPP manifesto). Many foreign entrepreneurs in the past few years have been invited to submit their feasibility reports to an uninformed bureaucrat, then made to cool their heels for many years while the bureaucrats merrily go along their 9 to 5 days (shortened by endless tea breaks, luncheon meetings and tours within and without the country). Except for exceptional individuals, bureaucracy has been a total failure in the field of commerce and industry. This is no reflection on bureaucracy, they were thrust pell mell into the commercial field without adequate background, practical knowledge or the crucial requirement of any business proposition of a personal financial stake in the success of a commercial venture. To any bureaucrat time and space governing the hustle of the business world has no meaning and they get away with delaying decisions all the time since in contrast to genuine entrepreneurs they have nothing personally at stake. How many bureaucrats have been convicted of negligence for delaying for weeks and months the purchase of critical commodities while the international price kept going up? In the matter of sugar and palm oil alone we have lost hundreds of millions of US dollars. Needless to say the exercise in nationalisation (howsoever sincere may have been PPP’s original intention in 1972 to take the national wealth out of hands of a few robber barons and spread it among the masses) had brought us eventually to a sorry economic pass because the robber barons were supplanted by bureaucrats who were worse, being seldom accountable, this process going into overdrive since 1977 when accountability went totally out of the window. Many of the commercial and industrial units of the public sector have had fantastic losses and become bankrupt, how many individuals have been brought to task?

One of the prime requirements has been to revitalize the energy sector so that supply catches up with the demand for sustained economic growth. For two/three years after the much-touted invitation to private sector investment in energy, probable investors have not made much progress. In the much celebrated case of Xenel (Hub River Project), the Letter of Intent (LoI) has been signed for over 2 years but the unit purchase price of electricity by the Ministry of Water and Power is yet to be decided so the project is still to get off the ground. Escalation has brought the price up by 25% already, if that is not a typical dog-in-the manger policy leading to a Catch-22 situation, nothing is. GoP could really have laid down the general parameters for investment and decided on the unit price of electricity (with an escalation formula) for different areas (developed or underdeveloped) in consultation with knowledgeable experts to give a fair return on investment. It is now believed that the PM herself has given a time limit to the bureaucracy to deliver Xenel by 30 Sept — or else! But how many times can an overworked PM intervene personally? If an entrepreneur fails to convince financial institutions within a laid down span of time, the project will be still-born. For LoIs in certain key sectors a Performance Bond may be levied to ward off economic adventurism. Similarly for other industries, similar parameters special to each case may be spelt out, the BoI giving out as many sanctions as meet these conditions, letting market forces rather than bureaucratic fiat decide the economic fate of enterprise. Even the socialist countries are well on their way to finding the heretic Ayn Rand now very believable and are doing away with excessive bureaucratic monitoring.

We do not envisage the BoI to function as a resurrected Board of Industrial Management with a bureaucrat installed as a Vice-Economic Czar. With no personal aspersion cast on Mr Shah himself, what we have seen of errant bureaucracy for the past decade or so given an umbrella protection by Martial Law, it is better that a political appointee be responsible to the PM. That private business has survived in the face of bureaucratic obduracy has been more an act of God, only a few selected individuals among the bureaucracy benefited from the public sector, neither PPP nor the masses it represented. God forbid that Ms Benazir’s BoI is enmeshed in similar travails, fed by periodic pronouncements of the many projects sanctioned on paper. The Cargill story about the frustrations about their orange juice and concentrate venture (now finally coming to fruition) should serve as an eye opener for anyone planning to overhaul our enterprise system and seeking foreign investment, Mr Shah would do well to use that lesson as a Case Study in entrepreneurial frustration and foot-dragging. Pakistan’s problem are purely economic. Ms Benazir’s crusade (at least that is what one believes) is going to be for economic deliverance to assuage the various ethnic social divisions exacerbating our society. She must create more jobs, only possible by attracting foreign investment. Outside entrepreneurs will only venture into Pakistan if they believe that they will not waste their time in a merry-go-round, running from pillar to post doling out money for each item, whether it be telephone, water, gas, electricity, etc while they keep searching for the elusive ONE-WINDOW. Ms Benazir must address the problem within her own government machinery which has been the only stumbling-block in our four decades to sustained economic development when compared with other countries who started much later than us down this road, notably South Korea, Taiwan, Turkey and Spain among them.

Corporate achievement in the private sector is the only true test of commercial and industrial ability, no bureaucrat could have reached that status (except after leaving the service). One cannot expect theoretical role models to succeed. Politicians have a performance-oriented vested interest in being elected (and thus accountable to the masses) at stake and thus can achieve the desired results. Let the PM appoint any politician from her own party having successful industrial and/or financial knowledge and expertise in the private sector to be responsible directly to her to ensure the success of the BoI. She has many members of her party in the Consultative Committee for Economic Policy, why not choose an untainted professional with financial experience in the world of international commerce from among them to be her man in the BoI? The PM is a political animal, she must depend upon members of her own club, particularly those having the necessary expertise in various disciplines.

One cannot have foxes protecting chicken coops, foreign investment becomes wary of rushing in where even angels fear to tread.

Share

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.

Comments

No comments yet.

Leave a comment

(required)

(required)