OICCI urges consistency, transparency, predictability in policies

ISLAMABAD: Foreign investors and companies operating in the country see a high investment potential in this market, but the inflows depend on positive vibes coming out from the government side, an official from Overseas Investors Chamber of Commerce and Industry (OICCI) said on Wednesday.

“There is no issue of energy shortage now and security situation has also improved to a large extent, but the government has to focus on broadening the tax base and bringing consistency, transparency, and predictability in their policies to attract more foreign investment,” Irfan Wahab Khan, president OICCI, said while briefing media on the chamber’s latest Business Confidence Index Survey 2018.

“Foreign investors have expressed their confidence in the new government, hoping to expand their businesses, but also highlighted some pain points which are increasing the tax burden. Moreover ad-hoc-based policy implementation is also affecting their propensity to invest in Pakistan.”

Investors’ interest was to some extent tied to supportive government policies, Khan said as he shared OICCI members’ investment in Pakistan and foreign investors’ perspective of the current situation and opportunities for investment growth.

According to the findings of the survey, in 2015, security, law and order situation was the top worry among investors, but has now retreated to third place; while current the top pain point is a rise in tax burden followed by policy execution issues.

The OICCI’s Security Survey conducted exclusively among the foreign investors in June 2018 has confirmed significant improvement in the security environment in Pakistan supported by substantial increase in the number of overseas visitors since 2014, including staff from overseas headquarters of leading multinational corporations.

Interestingly, the survey showed, the energy shortage, the second top pain point in 2015, has now dropped off their radar, and now they are satisfied with the power supply. It is worth mentioning that during the previous government, more and more investment was made in power generation to cope with the issue. Security, law and order situation has also widely improved as per the survey.

The survey said that increased cost of doing business was also a hurdle and “a lot of regulatory bodies led to an increase in the cost.

Khan told reporters that the tax regime needed to be reformed and tax base must be broadened. “Lack of consistency and predictability in policies was a challenge,” the OICCI president said.

Commenting on the OICCI’s recommendations for accelerated economic growth, Khan, representing the collective view of the 190 members, was confident that the new government would soon take some bold measures to put the economy on solid growth trajectory in line with the great potential of the country.

In the survey, the OICCI members have recommended measures to boost business confidence through policy announcements on matters relating to taxation, debt management, reform in Federal Board of Revenue and tax regime and measures to boost foreign direct investment (FDI), as well as improving Ease of Doing Business in Pakistan. Pakistan currently attracts low FDI, which is less than one percent of its GDP against the norm of three percent in the regional countries.

Looking ahead, OICCI in their paper, said it was positive about substantial growth in the FDI, in addition to China-Pakistan Economic Corridor (CPEC) investment, due to competitive advantage to Pakistan supported by a more focused approach by the government towards growth-oriented economic and trade policies.

“The need to continue aggressive documentation of the economy to broaden the tax base will significantly strengthen the revenue base of the country. Furthermore there are immense opportunities to transform the country into “Digital Pakistan” with the objectives to increase ease of doing business, enhance transparency, improve government-to-government, government-to-citizen services, thereby encouraging longer term investment into services sector and export oriented industries,” the survey said.

Wahab further said “during 2017, despite a challenging and unstable environment, the OICCI members invested a record $2.7 billion [mostly reinvestment] in expanding their business footprint in Pakistan, which was at par with the total new FDI received in the country during 2017-18.

“The OICCI members’ investment in 2017 was 20 percent higher than the previous year and was mainly in the energy, chemicals, and telecom sectors,” Khan highlighted.

The survey was participated by 130 out of a total 190 members and reflected the OICCI members total assets at $90 billion with a revenue of over $36 billion in 2017.