Tag Archives: Foreign Direct Investment

An Economic Task Force For Pakistan

Delivering aid in Pakistan faces several challenges including a lack of capacity among local Non-Governmental Organizations (NGOs) in some areas and critical perceptions of American intentions among the local population. While vital to laying the groundwork for economic development, aid is not enough. What Pakistan needs is greater access to world markets and increased foreign direct investment (FDI) to develop under-resourced sectors of its domestic economy. President Obama should facilitate this investment by convening a new economic task force for Pakistan.

Pakistan's under-resourced industries are an economic opportunity for American investment

“Trade, not aid” has been a consistent theme of Pakistan’s President Asif Ali Zardari. During last summer’s historic flooding, the Pakistani leader thanked the world’s nations for their generous assistance, but reminded them that what the country really needs is greater access to the global marketplace – a point reiterated by President Zardari during a visit to Washington earlier this month to honor the late Ambassador Richard Holbrooke.

An article by Muhammad Aftab, an Islamabad based journalist, in Monday’s Daily Times examines the current state of foreign direct investment in Pakistan, and identifies several opportunities for increased investment in Pakistan’s under-resourced energy sector including oil and natural gas exploration and production, hydro and thermal power, and enmerging sources of renewable energy.

To facilitate Pakistan’s domestic economic growth and advance our shared goal of a stable, prosperous and peaceful Pakistan, President Obama should convene a special task force similar to his recently announced Council On Jobs And Competitiveness headed by GE CEO Jeffery Immelt to develop a strategy for shifting from aid-based investment to private sector/FDI based development.

The task force should comprise a joint public-private venture of corporate executives and diplomats with experience in South Asia, and should be tasked with a mission to identify opportunities for American companies to invest in Pakistan and areas where the government can help facilitate such investment either through federal regulation or international diplomacy.

Unlike aid-based development, this approach would directly benefit both parties by opening a two-way path for economic expansion between US and Pakistani markets while simultaneously bolstering Pakistan’s developing economic sectors with much needed capital and expertise. Additionally, it will avoid past misunderstandings as the results of the task force will not be money ‘with strings attached’, but cooperative efforts between American and Pakistani industry.

In convening this task force, President Obama would also clearly demonstrate that the US is not repeating past mistakes by using aid as a temporary incentive for Pakistan’s support in Afghanistan, only to abandon the country when the fighting ceases. Such a move could have a significant impact in reducing anti-American sentiment once the Pakistani people see that the US is not a fair-weather friend, but a long time partner and ally with a long-term interest in Pakistan’s success.

According to Finance Minister Dr Hafeez Sheikh, “Pakistan has a very liberal investment regime. There are no restrictions on FDI and inflow of capital and outflow dividend income. The current investment policies are tailor-made to meet the investors’ needs.” Sheikh also said, “There is a great potential for investment in the fields of oil and gas, corporate faring, agriculture and infrastructure.”

China recognizes the untapped economic potential in Pakistan, which is why President Hu Jintao recently signed trade and investment deals with Pakistan worth $35 billion. The US would be remiss to pass up such an opportunity.

Benefits of a Civilian Nuclear Power Deal

Civilian nuclear energy

One of the more interesting recommendations of the recent RAND report, Counterinsurgency in Pakistan, is the development of a civilian nuclear power program for Pakistan. Pursuing a civilian nuclear power program for Pakistan makes sense, and could provide significant improvement in regional security, civilian infrastructure and perceptions of American intent.

Continue reading

Pakistan's Economy Hurt By Attacks On Government

Attacks on Pakistan’s democratically elected government by opposition parties and a hostile judiciary are damaging the nation’s economy according to Moody’s Investor Services analyst Aninda Mitra. According to an interview Mr. Mitra gave to Reuters news service on Wednesday.

“The government is constrained in its focus on long-term economic issues,” Aninda Mitra, Moody’s sovereign analyst for Pakistan, told Reuters in a telephone interview from Singapore.

“Its political position and legitimacy is constantly being questioned by various quarters, including state institutions as well as opposition political parties, and there is a somewhat tense relationship with the armed forces as well,” said Mitra.

“So all this exhausts the government’s political management capabilities, and limits the government’s focus on major economic issues.”

The government of President Asif Ali Zardari is under pressure from a hostile judiciary, sections of the media and the opposition led by former prime minister Nawaz Sharif.

Americans for Democracy & Justice in Pakistan released the following statement in response to this report:

“Moody’s B3 sovereign rating for Pakistan is a symptom of the larger issues in Pakistan our committee seeks to address. The government has been so hindered by the political maneuvering of opposition forces and a politically motivated judiciary that it ‘s efforts to improve the country’s economy and social well-being have been adversely affected. For example, the Supreme Court gave the National Accountability Bureau 24 hours (until today) to demand that the corruption case in Switzerland against President Zardari be re-opened, even though the previous ruling against Zardari in this case was overturned on appeal.”

“Investors, jobs, and economic growth are best promoted in a climate of political stability, with all sides working constructively together , within defined democratic processes, to improve the lives of the people. Citizens and political opponents must use the power of the vote, rather than strong-arm tactics, to create change. This is the formula for progress in thriving economies throughout the world. In spite of their rhetoric, political opponents are hurting, not helping, the people by undermining the sitting, democratically elected president rather than thinking creatively about how to generate economic progress.”

Foreign Direct Investment (FDI) has been down in Pakistan recently, in no small part due to fears of political instability as the democratic government has met a barrage of attacks – both from terrorists and political opponents – since it was elected. Analysts expect foreign investment in Pakistan to climb once investors’ fears about the security and stability of the government are assuaged.