Pakistan is a country with immense potential for economic growth and development. It has a large population of over 241 million people, a strategic location in South Asia, a rich and diverse culture, and abundant natural resources. However, It has been struggling with a weak economy, political instability, security threats, and social divisions.
The economy plays a pivotal role in the fate of the nation. One of the key factors that strengthen the economy is attracting more foreign direct investment (FDI). FDI can bring in capital, technology, skills, innovation, and market access that can boost a country’s productivity, competitiveness, and exports. However, Pakistan has not been able to attract enough FDI in the past due to various reasons.
That is why the recent establishment of the Special Investment Facilitation Council (SIFC) is a welcome and timely initiative. The SIFC is a body that aims to attract foreign direct investment (FDI) from friendly countries, especially from the Gulf Cooperation Council (GCC), in key sectors such as defense production, agriculture, mines and minerals, energy, and information technology. The SIFC will act as a single window for potential investors, providing them with policy predictability, continuity, and effective implementation. The SIFC will also adopt a whole-of-the-government approach, involving both civilian and military institutions in a unified effort to revive the economy.
The Council is not just another bureaucratic entity. It is a reflection of a new mindset and a new paradigm in Pakistan’s governance and foreign policy. It is an acknowledgement that Pakistan cannot rely on aid or loans to sustain its development. It needs to generate its own resources and create its own opportunities. It is also a recognition that Pakistan cannot afford to be isolated or antagonistic to its neighbors and allies. It needs to build trust and cooperation with them, especially with the GCC countries, which share historical, cultural, religious, and strategic ties with Pakistan.
The SIFC has set an ambitious target of attracting $100 billion in FDI within three years. This may seem unrealistic, given that Pakistan’s total FDI inflows in 2020 were only $2.56 billion. However, the SIFC has some advantages that can help it achieve its goal. First, it has the backing of the highest levels of leadership in Pakistan, including Army Chief Asim Munir. Both military and political leadership have expressed their commitment and support for the SIFC and its objectives.
Second, it has identified sectors that have high potential for growth and profitability in Pakistan, such as defense production, which can benefit from Pakistan’s expertise and experience in developing indigenous weapons systems; agriculture, which can leverage Pakistan’s fertile land and diverse climate; mines and minerals, which can tap into Pakistan’s rich natural resources; energy, which can address Pakistan’s chronic power shortages; and information technology, which can capitalize on Pakistan’s young and talented workforce. Third, it has chosen partners that have strong interest and capacity to invest in Pakistan, such as the GCC countries, which have surplus capital and are looking for diversification of their economies.
The SIFC is not without challenges or risks. It will have to overcome bureaucratic hurdles, security threats, political uncertainties, legal disputes, and social resistance that may hamper its operations. It will also have to balance its interests and obligations with other stakeholders, such as China, the United States, India, Iran, and Afghanistan. It will have to ensure that the FDI it attracts is transparent, accountable, inclusive, sustainable, and beneficial for both Pakistan and its partners.
In the past, Pakistan has introduced various such policy frameworks that could cover all critical areas of the economy and security progress. However, it lacked concrete action plans to reinforce these policies. As a result, business environment could not be made conducive enough for local and foreign investors. For instance, to register a company, an investor has to deal with different agencies while foreigners also need to acquire no-objection certificates and go through a lengthy and exhaustive process. It takes 113 days to get an electricity connection, 125 days for a construction permit and 105 days for property registration. These time frames are according to the SOPs, but on ground, the situation is worse.
Moreover, the tax system is extremely cumbersome where 35 departments or agencies are involved. On top of that, provincial tax systems provide another layer of complexity for investors, which were introduced after the Eighteenth Amendment.
Notwithstanding, the decision to delegate the SIFC with a substantial military presence emerges from a broader context of geopolitical considerations and the desire to instill investor confidence. The pressing demand from GCC countries for military-backed guarantees for investments indicates a lack of confidence of foreign investors and governments in Pakistan’s political elite and its ability to fulfill business pledges across government transitions. The army’s engagement in economic decision-making could offer a sense of policy consistency, but it also raises concerns over the dwindling democratic process. The delicate reciprocity between military and civilian spheres demands careful conduct by both sides to ward off a challenge of undue military influence over significant economic policies.
The SIFC is not a magic bullet that will solve all of Pakistan’s problems. It is a step towards progress that will require hard work, patience, perseverance, and pragmatism. It is an opportunity that Pakistan should not miss or waste. SIFC is a chance for Pakistan to redefine itself as a confident, constructive, and cooperative player in the region and the world.
Iqra Awan is a Research Fellow at Quaid-i-Azam University, Islamabad and can be reached at email@example.com