LAHORE: How a country is perceived globally plays an important role in its economic prospects. Investors, lenders, multinational corporations, tourists and even trading partners are influenced mostly by a country’s GDP growth, reserves, taxation, etc.
Pakistan’s international image has improved recently due to active diplomacy. The government is paying greater emphasis on counterterrorism success and regional peace efforts, and global investors are closely watching the positive impact of this. Then there are signs of macroeconomic stabilisation under the IMF programme. Lately there is also some progress in digitisation, climate diplomacy and infrastructure.
This enhanced perception has definitely helped. It has reduced capital flight, encouraged portfolio inflows, and created a ‘wait-and-see’ optimism among investors. But perception alone is not enough — if investors don’t see structural improvements, the optimism fades quickly.
Perception is a multiplier; it enhances or depresses the impact of real reforms. Pakistan’s improved image is a good start, but sustained credibility with investors will come only if political stability, governance reforms and consistent policies back up the narrative. Factors like credibility, political stability and international reputation do matter to prospective investors.
We are at the primitive stage where positive perception has reduced the risk premium that investors demand. For example, countries perceived as politically stable attract FDI at lower financing costs. Global lenders and bond buyers judge countries by their reputation for repayment, governance and predictability. A poor perception raises borrowing costs.
Buyers often prefer sourcing from countries with reliable systems, transparency and rule of law, and past bad perception has kept international trade with Pakistan limited. Countries’ image, particularly regarding the safety of citizens, shapes people’s willingness to visit or study in a country, feeding service exports. We in fact lost a lot of tourists and foreign businessmen because of unstable law and order. Moreover, migrant remittances and diaspora business networks grow stronger when the home country’s reputation is positive. In this regard the diaspora seems to be responding to conferences of overseas Pakistanis addressed by the prime minister and the military leadership.
Still Pakistan must double up its efforts to further improve its global image for investors. To convert goodwill into real economic benefits, Pakistan needs to back perception with action like ensuring political stability as investors fear abrupt policy reversals. Political consensus on economic reforms is key to boost the confidence of prospective investors. There is also a need to strengthen rule of law. In this regard we need transparent courts, contract enforcement and protection of property rights to reduce risk perceptions.
Red tape is a headache, both for domestic and international investors, and it must be strictly checked through rule of law. The ease of doing business must be improved, and planners should create predictable tax/regulatory regimes.
Perception of corruption is one of Pakistan’s biggest image problems; credible enforcement is essential. Stable policies in textiles, IT, agriculture and engineering exports must show long-term seriousness.
Showcasing success stories improves the country’s perception. We should proactively market Pakistan’s startups, digital economy, and industrial projects through international forums. Pakistan’s vulnerability to climate change can be turned into an advantage by adopting green energy and climate-smart agriculture.
Despite the best efforts of this regime money laundering still takes place though at a little lower level. Billions of dollars are still used to under-invoice numerous items. There is a need to eliminate under invoicing through transparent customs. We need to strengthen financial transparency and make meaningful efforts to formalise the economy and tax net credibility to reassure international markets.