Investment Policy of Pakistan

Foreign Investment
in Pakistan
Foreign Investment in Pakistan
 Low investment in
Pakistan
 ADB: Each year in
1990s
• Negligible FDI: 0.2%
of the world total
• Less than 1% of the
Asian subtotal in
1990s
Foreign Investment in Pakistan
• Major concentration of
FDI: power sector
o Domestic-oriented
sector, large foreign
exchange costs
o Serious balance of
payment
implications
• Urban violence,
inconsistent economic
policies
• Bureaucratic
inefficiencies*
Investment Policy of Pakistan

Making Investment
Policy
Making Investment Policy
 In 2012 & 2013
 Investment policy 2013
 Investment strategy
2013-17
• No restrictions: no
lower limit; no upper
limit
• A long list of steps for
project’s approval
• Call for one window
operations for the
investors
Making Investment Policy
• Investment policy: $
5.5 bn per year
 Special Economic
Zones (SEZ) Act 2012
• Industrial clusters
• Liberal investment
regime
• Physical infrastructure
in SEZs
• Full legal protection of
investment
Making Investment Policy
• SEZs reduce the cost
of business for
investors
• Reducing barriers to
investment
• All sectors and
activities are open for
FDA (except
security/public safety
o Arms and
ammunitions;
o High explosives;
Making Investment Policy
o Radioactive
substances;
o Securities,
o Currency,
o Mint;
o Consumable
alcohol.
• Foreign investors can
repatriate profits,
dividends, or any
other funds any time
o Currency of the
investment origin
country
Making Investment Policy
• Permission for
opening of branches
of foreign banks
• Foreign investors
entitled
o Sell shares,
o Transfer ownership,
o De-register under
Companies
Ordinance 1984
• Banking Companies
Ordinance 1962
Making Investment Policy
• The BoI + SBP, SECP
and MoF promote
investment:
o Insurance,
o Banking
o Financial sectors.
• Foreign investors can
exchange
o Local currency into
any other freely
convertible foreign
currency,
Making Investment Policy
o Foreign Exchange
Regulations of SBP.
• No restrictions on the
use of foreign private
loans
• Foreign investors
allowed to access
domestic borrowings
• Foreign investors
entitled to lease land
without limitation
Making Investment Policy
• No limitation on the
transfer of any land
held by a foreign
investor
• No restrictions on
foreign real estate
developers
• Foreign investors
have a 60pc stake in
agriculture projects.
• Investors hold 100pc
equity in corporate
farming*
Investment Policy of Pakistan

Implications of
Investment Policy
Implications of Investment Policy
 Marginalization of
domestic commerce
 Flight of capital
 Lack of encouragement
to local
entrepreneurship
 Lack of support for
innovation
 Land grabs*
Investment Policy of Pakistan

Balancing
Investment Policy
Balancing Investment Policy
 FDI may not be the
solution
 Correcting institutions
 Encouraging
entrepreneurship
 Encouraging innovation
 Business with social
responsibility*