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Pakistan Investment Board

Of the many obstacles to foreign investment in Pakistan, widespread terrorism stands out as the greatest economic hurdle, particularly in the gateway Province of Sindh. While the law and order problem has been brought under control in many parts of the country and arms proliferation has gone down commensurate to the winding down of the Afghan war, the “terror” of wading through Pakistan’s bureaucracy keeps foreign investors at bay. Recognising this problem, successive governments have initiated various schemes designed to encourage entrepreneurs that the “one-window” operation is supposed to be an end run around the flanks of bureaucracy. The bewilderment of intending investors at not finding the elusive “window” despite the best efforts of the political government to propagate the same must be excused, bureaucracy as usual has managed to turn this exercise into another fashionable but false trail to follow. Ms Benazir had tried to institutionalise the concept by having a Board of Investment (BoI). To give it teeth it was put directly in the Prime Minister’s (PM’s) Secretariat. The mistake then made was that a serving bureaucrat was made executive Supremo under a figurehead, as bureaucrats are apt to do a blizzard of statistics was soon created to camouflage fact from fiction and label the process an outstanding success. Though not in the measure that the government of that day would have us believe, one is still inclined to call it a success, even if one penny was attracted thereof into Pakistan, some purpose was still achieved.

Because of many lurid tales of corruption surrounding Ms Benazir’s government, the BoI got a special pedestal of approbation from her successors. In fairness, one can say that while relations/friends are suspected to have got inordinately involved into things which were none of their business the rumours turned out to be more fiction than fact. Most are now seen to be unproven, through some are fact without the evidence to say so. Unfortunately, the BoI was dismantled as soon as the PPP Government fell and an excellent concept was consigned to oblivion to the detriment of Pakistan’s economy.

Recognising the need belatedly to have something like the BoI the Nawaz Sharif Government has resurrected it in the form of Pakistan Investment Board (PIB) with more or less the same mandate and parameters (a rose by any other name?). Given that the present Government has instituted far-reaching liberalising reforms in the economy, this step was more than overdue to channelise foreign investment into the country. Without casting aspersion on the individual himself, the selection of any bureaucrat to head the Board is counter-productive, only a dynamic politician or a businessman or better still a combination of both can deliver the goods. Probably that is why the Chairmanship has soon been taken over by the serving Minister of Industries in supersession of a bureaucrat.

The sanctioning of permissions of any kind is a negative act by itself, in contrast to the imperial bureaucracy route, the correct method should be to lay down the parameters very clearly as to the various requirements inasfar as Zoning, Environment, Safety Precautions, Labour Laws, etc are concerned. Within these parameters, the potential entrepreneur should not have to run to anybody from pillar to post but must go ahead with his project with the utmost speed. The entrepreneurs should clearly understand that the violation of any of the parameters indicated would invoke mandatory fines or if the violation was that serious, even closing down of the facility, to their financial detriment.

Any exercise that involves permission from the Government of any kind is going to be counter-productive for three reasons, viz (1) that it is the inherent tendency of government agencies to refuse any permission (2) it acts as a psychological road block in the minds of investors and (3) it creates in-built opportunity for corruption down the line. The PIB would be effective in implementing its mandate if it ensures that electricity, gas, water, telecommunications are made available to the intending entrepreneurs on the SAME day that he applies for these facilities in the Industrial Zones created. A time clock then should start ticking for the project to materialise, with mandatory fines for non-implementation after reasonable period so that speculators in real estate are kept away. Thereafter, the PIB’s role should be limited to helping out the entrepreneurs if they face any problems from officialdom, i.e. to act as a monitor of bureaucracy rather than the entrepreneurs. The only thing the PIB should have is a negative list of industries, thereafter it is upto the entrepreneurs to convince the financial institutions that their proposed project has the economics to be profitable. Free enterprise is the only way to ensure economic emancipation, this can only be possible if no restrictions are imposed, obstacles will simply deter entrepreneurship.

Too much emphasis has been put on investment by Multi-National Companies (MNCs), foreign companies, etc and very little on investment from our own nationals abroad. One has just to look at our urban and rural centres to establish that commerce and industry obey the natural rules of “supply and demand” which cannot be put down due to artificial restrictions. Most of our expatriates abroad have made small investments in real estate, shops, small industries, etc all over the country. In many cases, they are still working abroad and repatriating their hard earned money while their close relations are managing their wholly-owned small domestic investments. This certainly helps the economy but in a haphazard manner and most of it is in the commercial sphere rather than in industries. Now that we have credible financial institutions in the country, these investments can be channelised as share capital in heavier/medium-sized industries and other bigger commercial ventures. We are already seeing the packaging of public floatation of shares in our taken-over industries, with our enterprising financial entrepreneurs inviting investment from our nationals working in the Middle East. We must give more emphasis on foreign investment into the country by our own expatriates abroad including bonus shares (with adequate restrictions for re-selling, etc). Once there is a regular inflow of investment by our nationals abroad into the country, there will be commensurate investment by Multi-National Companies (MNCs) and other national companies, both public and private.

To facilitate and encourage investment, it is necessary to have regular and meaningful investment conferences. This should be in three phases (1) the initial meeting should be in the country from where the investment is to be attracted from, on a six-monthly basis, followed (2) by a meeting of those short-listed by intention in the Provincial Capital of the Province where the investment is likely to be made and (3) a final meeting in the Federal Capital in order to consolidate the likely investment on a Federal basis. We could possibly stagger investment conferences in New York, London, Frankfurt or Geneva, Dubai, Singapore and Hong Kong for a three-day period each in the month of January. This should be the culmination of a mail campaign, both to our nationals through the respective Chambers of Commerce and Industry and likely MNCs (and other likely foreign companies) by our Embassies abroad. Each Provincial Government should prepare a list of likely industries for investment with the active help of the local Chambers of Commerce and Industry. Potential domestic partners of the foreign investment should be associated and selected, keeping their credibility, experience and financial viability as factors to consider. A delegation of the various Chambers of Commerce and Industry from each Province, composed mostly of local entrepreneurs seeking investment, accompanied by at least two senior officials from each Province would then go to the first city selected starting possibly with Frankfurt or Geneva for a period of three days, then onto London, New York, Dubai, Singapore and ending in Hong Kong. All local and foreign banks would be encouraged to send along an executive to accompany the delegation. During this investment conference, on the FIRST DAY a period of 2 hours at least should be kept for introducing Pakistan at length, each Province should then brief the participants about opportunities/requirements in their particular region separately for an hour or so each. At the start of the SECOND DAY, participants may then themselves approach the Provinces they are interested in to cooperate and have face-to-face meaningful discussions. This is the most important part and can continue till the middle of the THIRD DAY. Some period remaining in the THIRD DAY should be used so that the participants can air the main points they need to clarify, then spend the rest of the time consolidating the work done. Each Province should then leave one official member of their delegation for another three days for a follow-up on the discussions, this member can catch up after skipping one city and so on.

Once the full delegation is back in Pakistan, the results of the full trip must be immediately collated and disseminated to all concerned. A conference within the country must then be scheduled for the end of March. The potential entrepreneurs should then come to Pakistan, reaching preferably on a Saturday and attend an initial conference in Karachi on Sunday and Monday. They then go to either Quetta or Peshawar for a day (Tuesday) as they may desire, followed by Lahore or Rawalpindi for another two days (Wednesday and Thursday). The last stage would be in Islamabad for two days for a final round-up (Friday and Saturday), leaving on Saturday evening. In this way one may get meaningful participation, the process can be held on a six-monthly basis, being repeated in September for our delegation to go abroad and in November for the delegates to come from abroad for the Pakistan leg.

Dissemination of information, organising the domestic itinerary of intending entrepreneurs, interceding where necessary to support the investment promotion process, etc are some of the roles envisaged for the PIB. The person who heads the PIB needs to be a super-salesman and a successful entrepreneur. Shaikh Rasheed, the incumbent Minister for Industries, must certainly be trying hard but a consummate diplomat he is not, unfortunately every salesman has to be, and he certainly has no known track record as an entrepreneur. The fact that he can only communicate colourfully may act as an obstacle rather than facilitate the investment process. Shaikh Rasheed could be gainfully employed for other cabinet duties as his multifarious talents suggest but the role of Chairman PIB is definitely not suited to him. If the PM is serious about the PIB and investment in Pakistan, then he must select an individual who is not only eminently qualified to implement that mandate but must be given cabinet rank to do just that on a full-time basis.

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