News Analysis: SIFC — the battle ahead for Pakistan’s economic revival

ISLAMABAD: Prime Minister Shehbaz Sharif launched the Special Investment Facilitation Council (SIFC) to attract investments and boost economic growth. The council aims to unite civilian and military expertise to instill confidence in potential investors.

It focuses on attracting investments from GCC countries in key sectors such as defence production, agriculture, minerals, IT, and energy. This visionary initiative has the potential to transform Pakistan’s economic trajectory and foster sustainable development by leveraging the nation’s vast potential.

In a bold bid to overcome prevalent challenges hindering foreign investment, the SIFC seems to have set its sights on addressing obstacles head-on through a four-pronged approach: enhance investor confidence; facilitate timely decision making; foster synergy between the federal and provincial governments; and ensure swift project implementation. So far so good. Foreign direct investment (FDI) is influenced by various factors that attract investors to a particular country. The top-10 drivers behind foreign direct investment include market size and growth, economic stability, political stability and governance, liberalized trade policies, skilled workforce, infrastructure development, natural resources and raw materials, tax incentives and investment policies, market access and trade agreements and technological advancement.

Here are the top-10 reasons why foreign investors have been hesitant to invest in Pakistan: political instability, inconsistent economic policies, energy crisis, bureaucratic hurdles, security concerns, corruption, weak infrastructure, access to finance and a lengthy dispute resolution process. The SIFC has had a promising start but faces an extremely challenging uphill task. The SIFC’s success undeniably hinges on its resolute adoption of a strategic and multifaceted 10-step approach.

Step 1: Ensure political stability. Ensuring political stability will be essential to instill confidence and attract long-term foreign investments.

Step 2: Export oriented investments. Our existing FDI model is deeply flawed. Presently, we extend invitations to foreign entities to establish their presence in Pakistan, shielding them from competition. As a result, these entities assemble and distribute substandard products within the country while repatriating profits to their parent companies. To rectify this situation, we must proactively identify and prioritize sectors boasting high export potential. By offering targeted support and incentives for investments in these areas, we can foster growth and competitiveness.

Emphasis should be placed on industries where Pakistan holds a competitive advantage or possesses unique opportunities.

Step 3: Policy reforms and incentives. The government must initiate comprehensive policy reforms to create a favorable investment climate. This includes simplifying regulations, reducing bureaucratic red tape, and offering attractive incentives such as tax breaks, investment grants, and land lease options.

Step 4: Ease of doing business. Streamline administrative processes and implement electronic platforms for business registrations and approvals. A business-friendly environment will encourage foreign investors to set up operations in Pakistan.

Step 5: Investor protection and dispute resolution. Strengthen investor protection measures and establish efficient mechanisms for dispute resolution. A fair and transparent legal system will boost investor confidence.

Step 6: Public-private partnerships (PPPs). Foster collaboration between the public and private sectors through PPPs. These partnerships can fund and manage major infrastructure projects while sharing risks and rewards.

Step 7: Investor outreach and promotion. Proactively engage with potential investors through targeted marketing campaigns, roadshows, and investment seminars. Highlight the country’s strengths and potential sectors for growth.

Step 8: Infrastructure development. Improve and upgrade critical infrastructure, including transportation networks, energy supply, and digital connectivity. A well-developed infrastructure will make Pakistan an attractive destination for investors seeking efficient operations and logistics.

Step 9: Skilled workforce development. Invest in vocational training programs to enhance the skill set of the local workforce. A skilled labor force will not only attract foreign investors but also contribute to increased productivity and economic growth.

Step 10: Monitoring and feedback. Continuously monitor the investment climate, gather feedback from existing and potential investors, and be responsive to their needs. By diligently following this 10-step process, the SIFC can create an attractive and conducive environment that encourages foreign investors to invest in Pakistan, ultimately driving economic growth and development.