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CPEC vs IMF in Pakistan

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International Monetary Fund (IMF) was created just after World War II (WWII) in 1945. The IMF is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Pakistan has been knocking doors of IMF since 1958, and it has been 21 agreements with IMF. Generally, the IMF provides loans at very low-interest rates and provides programs of better governance and monitoring too. But for the last 6 decades, Pakistan has suffered a lot, in terms of good governance. Especially last 2 decades, corruption, nepotism, poor planning, bribery, weakening of institution, de-moralization of society, etc were witnessed. We may not blame the IMF for all such evils but must complain that the IMF failed to deliver, what was expected. Of course, it is our country, we are responsible for all evils, and wrongdoings happened to us. We have to act smartly and should have made the right decision and at right times.

IMF also dictates its terms and condition or programs like: devaluation of local currencies, which causes inflation and hike in prices, cut or draw-back of subsidies on basic utilities like fuel, gas, electricity, food, agriculture etc, which causes cost of life rather higher for local people, cut on development expenditures like education, health, infrastructure, and social development etc, which pushes the country even more backward. IMF focusses only on reducing expenditures and collection of taxes to make a country to meet the deadlines of payments. IMF does not care about the development of a country, but emphasizes tax collections and payment of installments on time, to rescue a country from being a default.

While CPEC is an initiative where projects are launched in Power Generation, Infrastructure development under the early harvest program. Pakistan was an energy trust country and facing a severe shortage of Electricity. But after completion of several power projects under CPEC, the shortfall of electricity has been reduced to a great extent. One can witness no load shedding today, while, just a few years back the load shedding was visible throughout the country for several hours a day. Several motorways and highways have been completed. Gwadar port has been operational partially. Infrastructure developments are basic of economic activities.

Projects under CPEC has generated jobs up to 80,000. CPEC was the catalyst to improve GDP by around two percent during 2015-2018. CPEC has lifted the standard and quality of life of the common man in Pakistan. CPEC was instrumental to move the economic activities and circulation of wealth in society. Under CPEC, early harvest projects, 22 projects have been completed at the cost of approximately 19 billion US dollars.

It is understood that early harvest projects were heavy investment and rather slow on returns. But, these projects have provided a strong foundation for the second phase, where Agriculture, Industrialization and Social Sector will be focused. Return on Agriculture and Industrial produce is quick and also generates more jobs. The second phase will contribute toward the social development of Pakistan as well as generate wealth for the nation.  Pakistan’s agriculture sector has huge potential as cultivatable land is huge, workforce is strong and climate is favorable.  Regarding Industrialization, Pakistan is blessed with an abundance of mines and minerals. The raw material is cheap and the labor cost is competitive. Pakistan has 70% of its population under the age of 40 years, which means an abundance of the work force. Pakistan’s domestic market is 220 million and the traditional export market is the whole of the middle-east and the Muslim world.

The major difference between the CPEC and IMF is that CPEC generates wealth, while IMF focuses on tax collection and reducing the developments and growth. China is the latest model of developments in the modern days, China is willing to replicate its experience with Pakistan for its rapid development.

Prof. Engr. Zamir Ahmed Awan, Sinologist (ex-Diplomat), Non-Resident Fellow of CCG (Center for China and Globalization), National University of Sciences and Technology (NUST), Islamabad, Pakistan.

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The Silk Road passes also by the sea

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On December 30, 2020, China and the European Union signed an agreement on mutual investment.

After seven years of negotiations, during a conference call between Chinese President Xi Jinping and Ursula Von Der Leyen, President of the European Commission, with French President Emmanuel Macron, German Chancellor Angela Merkel and European Council President Charles Michel, the “Comprehensive Agreement on Investment” (CAI) was adopted.

This is a historic agreement that opens a new ‘Silk Road’ between Europe and the huge Chinese market, with particular regard to the manufacturing and services sectors.

In these fields, China undertakes to remove the rules that have so far strongly discriminated against European companies, by ensuring legal certainty for those who intend to produce in China, as well as aligning European and Chinese companies at regulatory level and encouraging the establishment of joint ventures and the signing of trade and production agreements.

The agreement also envisages guarantees that make it easier for European companies to fulfil all administrative procedures and obtain legal authorisations, thus removing the bureaucratic obstacles that have traditionally made it difficult for European companies to operate in China.

This is the first time in its history that China has opened up so widely to foreign companies and investment.

In order to attract them, China is committed to aligning itself with Europe in terms of labour costs and environmental protection, by progressively aligning its standards with the European ones in terms of fight against pollution and trade union rights.

With a view to making this commitment concrete and visible, China adheres to both the Paris Climate Agreement and the European Convention on Labour Organisation.

China’s adherence to the Paris Agreement on climate and on limiting CO2 emissions into the atmosphere is also the result of a commitment by China that is not only formal and propagandistic. In fact, one of the basic objectives of the last five-year plan – i.e. the 13th five-year plan for the 2016-2020 period – was to “replace unbalanced, uncoordinated and unsustainable growth… also with innovative, coordinated and environmentally friendly measures…”.

In the five-year period covered by the 13th five-year plan, China reduced its CO2 emissions by 12% – a result not achieved over the same period by any other advanced industrial country, which shows that the policy of “going green”, so much vaunted by European institutions, has actually begun in China, to the point of making it realistic to achieve “zero emissions” of greenhouse gases by 2030, thanks to the decision to completely relinquish the use of fossil fuels in energy production.

President Xi Jinping has entrusted China’s policy of “turning green” to the Chinese government’s “rising star”, Lu Hao, i.e. the young Minister of Natural Resources aged 47, who has been chosen as the political decision-maker and operational driving force behind a major project to modernise the country.

Lu Hao has an impressive professional and political record: an economist by training, he was initially appointed First Secretary of the “Communist Youth League”, and later served as deputy mayor of Beijing from 2003 to 2008. Governor of the Hejlongjiang Province (where 37 million people live),he has been serving as Minister of Natural Resources since March 2018.

He is the youngest Minister in the Chinese government and the youngest member of the Party’s Central Committee.

While entrusting Lu Hao with his Ministerial tasks, President Xi Jinping stressed, “we want green waters and green mountains… we do not just want much GDP, but above all a strong and stable green GDP.”

A “green GDP” is also one of the objectives of the “Recovery Plan” drawn up by the European Union to help its Member States emerge from the economic crisis caused by the Covid 19 pandemic through measures and investment in the field of renewable energy.

“Going green” may represent the new centre of gravity of relations between Europe and China, according to the operational guidelines outlined in the “Comprehensive Agreement on Investment” signed on December 30 last.

China’s commitment to renewables is concrete and decisive: in 2020 solar energy production stood at five times the level of the United States while, thanks to Lu Hao’s activism, in 2019 China climbed up the U.N. ranking of nations proactively committed to controlling climate change, rising from the 41st to the 33rd place in world rankings.

On January 15, Minister Lu Hao published an article in the People’s Daily outlining his proposals for the upcoming 14th Five-Year Plan.

During the five-year period, China shall “promote and develop the harmonious coexistence between man and nature, through the all-round improvement of resource use efficiency…through a proper balance between protection and development”.

In Lu Hao’s strategy – approved by the entire Chinese government – this search for a balance between environmental protection and economic development can be found in the production of electricity from sea wave motion.

Generating electricity using wave motion can be a key asset in producing clean energy without any environmental impact.

Europe has been the first continent to develop marine energy production technologies, which have spread to the United States, Australia and, above all, China.

Currently 40% of world’s population lives within 100 kilometres of the sea, thus making marine energy easily accessible and transportable.

Using the mathematical model known as SWAN (Simulating Waves Nearshore), we can see that along the South Pacific coasts there are energy hotspots every five kilometres from the shore, at a depth of no more than 22 metres. In other words, thanks to currents, waves and tides, the Pacific has a stable surplus of energy that can be obtained from the sea motion.

Today, energy is mainly obtained from water using a device known as “Penguin”, which is about 30 metres long and, when placed in the sea at a maximum depth of 50 metres, produces energy without any negative impact on marine fauna and flora.

Another key technology is called ISWEC (Inertial Sea Waves Energy Converter). This is a device placed inside a 15-metre-long floating hull which, thanks to a system of gyroscopes and sensors, is able to produce 250 MWh of electricity per year. It occupies a marine area of just 150 square metres and hence it allows to reduce CO2 emissions by a total of 68 tonnes per year.

ISWEC is an Italian-made product, resulting from research by the Turin Polytechnic Institute and developed thanks to a synergy between ENI, CDP, Fincantieri and Terna.

Italy is at the forefront in the research and production of technology that can be used for converting wave motion into ‘green’ energy. This explains the attention with which Chinese Minister Lu Hao looks to our country as a source of renewable energy development in China, as well as the commitment that the young Minister, urged by President Xi Jinping, has made to promote an extremely important cooperation agreement in the field of renewable energy between the Rome-based International World Group (IWG) and the National Ocean Technology Centre (NOTC), a Chinese research and development centre that reports directly to the Ministry of Natural Resources in Beijing.

The cooperation agreement envisages, inter alia, the development of Euro-Chinese synergies in the research and development of essential technologies in the production of “clean” energy from sea water, as part of a broad Euro-Chinese cooperation strategy that can support not only the Chinese government’s concrete and verifiable efforts to seriously implement the strategic project to reduce greenhouse gases and pollution from fossil fuels, but also support Italy in the production of “green” energy according to the guidelines of the European Recovery Plan, which commits EU Member States to using its resources while giving priority to environmental protection.

The agreement between IWG and NOTC marks a significant step forward in scientific and productive cooperation between China and Europe and adds another mile in the construction of a new Silk Road, i.e. a sea mile.

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Major impediments to Pakistan’s economic growth

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Pakistan’s economy is, currently, faced with myriad problems.  These problems have been compounded by inconsistent and erratic economic policies followed during democratic and praetorian periods. Successive rulers kept taking loans and spending them as if they were grants. External Debt in Pakistan increased to US$ 113803 million in the third quarter of 2020 from US$ 112858 million in the second quarter of 2020 (State Bank of Pakistan). The debt is econometrically projected to be around US$ 117500 in about 12 months’ time. By the end of year 2021, it would be about US$ 118500 million.

Pakistan’s debt burden has a political tinge. The USA rewarded Pakistan by showering grants on Pakistan for joining anti-Soviet-Union alliances (South-East Asian Treaty Organisation and Central Treaty Organisation).  With advice from a Harvard group of economists, Ayub Khan tried to steer the economy in a planned and prioritized manner.  A Perspective and five-year plans were drawn up, implemented and evaluated after the due period. The less said about the subsequent period, the better.

The grants evaporated into streams of low-interest loan which ballooned as Pakistan complied with forced devaluations or adopted floating exchange rate. Soon, the donors forgot Pakistan’s contribution to the break-up of the `Soviet Union’. They used coalition support funds and our debt-servicing liability as `do more’ mantra levers.

In economics there are burden-of-debt models that could help decide how productively the debt should be so used that both principal and debt-service could be repaid. Unfortunately we spent the debt as if it were a non-repayable windfall bonanza.

Odious debts

Apparently, all Pakistani debts are odious as they were thrust upon praetorian regimes to bring them within anti-Communist (South East Asian Treaty Organisation, Central Treaty Organisation) or anti-`terrorist’ fold.  To avoid unilateral refusal of a country to repay odious debts, UN Security Council should ex ante [or ex post] declare which debts are `odious’ (Jayachandaran and Kremer, 2004). Alternatively, the USA should itself write off our `bad’ debts.

But Pakistan and its adversaries are entrapped in a prisoner’s dilemma. The dilemma explains why two completely rational players might not cooperate, even if it appears that it is in their best interests to do so. .The ` prisoners’ dilemma’ was developed by RAND Corporation scientists Merrill Flood and Melvin Dresher and was formalized by Albert W. Tucker, a Princeton mathematician.

No sustained action for forgiveness of `odious debts

Several IMF and US state department delegations visited Pakistan. But, Pakistan could not tell them point-blank about non-liability to service politically-stringed debts. The government’s dilemma in Pakistan is that defence and anti-terrorism outlays (26 per cent) plus debt-service charges leave little in national kitty for welfare. Solution lies in debt forgiveness by donors (James K. Boyce and Madakene O’Donnell(eds.), Peace and the Public Purse.2008. New Delhi. Viva Books p, 251).

Debt forgiveness promotes growth

Debt forgiveness (or relief) helps stabilise weak democracies, though corrupt, despotic and incompetent.  Research shows that debt relief promotes economic growth and boosts foreign investment. Sachs (1989) inferred that debt service costs discourage domestic and foreign investment. Kanbur (2000), also, concluded that debt is a drag on private investment.

In fact, economists have questioned justification of paying debts given to prop up a regime congenial to a dominant country.  They hold that a nation is not obliged to pay such `odious debts’ (a personal liability) showered upon a praetorian individual (p. 252 ibid.). Legally also, any liability financial or quasi-nonfinancial, contracted under duress, is null and void.

In an interview with Associated Press, Pakistan’s prime minister called upon the world community to write off the debt burden of poor countries so as to help them cope with COVID19 epidemic (Dawn March 17, 2010). But, his voice proved to be a voice in the wilderness.

No formal application for write-off: Successive Pakistan governments treated loans as freebies. They never abided by revised Fiscal Responsibility and Debt Limitation Act. Nor did our State Bank warn them about the dangerous situation.

What a pity! Whenever International Monetary Fund’s delegations visit, Pakistan’s representatives keep mum about the politically-motivated odious nature of our debt burden. They lack the nerve to tell them point-blank Pakistan’s non-liability to service politically-stringed debts. They government’s dilemma in Pakistan is that defence and anti-terrorism outlays plus debt-service charges leave little in national kitty for welfare. Solution lies in debt forgiveness by donors (James K. Boyce and Madakene O’Donnell (eds.), Peace and the Public Purse.2008. New Delhi. Viva Books, p. 251).

Benefits of Write-Off: Debt forgiveness (or relief) helps stabilise weak democracies, though corrupt, despotic and incompetent.  Research shows that debt relief promotes economic growth and boosts foreign investment. Sachs (1989) inferred that debt service costs discourage domestic and foreign investment.  Kanbur (2000), also, concluded that debt is a drag on private investment.

Political parties without economic agenda

Parties win elections by pandering to base sentiments of the people. A key element of election slogans is always ‘change’. But, the nitty-gritty of the ‘change’ remains a strictly guarded mumbo jumbo. Sincerity demands that the parties should spell out their policies with regard to various factors of production, i.e. land, natural resources, the socio-economic milieu, labour, capital and organisation. But, they keep mum about their agenda. In their hearts, the leaders knew that the voters have little choice. They would vote either for the charisma of one leader or against the hatred of another. The voters do not force the leaders to give a dispassionate perception of the country’s problems along with an inventory of prioritised solutions.

Intellectual apathy has been the hallmark of elections. There is no tradition of political parties having shadow cabinets with a bagful of alternative policies.

The taxation proposals do little to squeeze the haves. Nothing is done to reduce inequitable distribution of wealth and economic power. No heed is paid to the structure of our society. How did the filthy rich, the feudal lords and the industrial robber barons come into being? If accumulated wealth in a few hands is rooted in wrongdoing, a considerable chunk of it should be mopped up. Vested interests resist the change.

The British created a class of chieftains to suit their need for loyalists, war fundraisers and recruiters in the post-’mutiny’ period and during the Second World War. A royal gubernatorial gazetteer states: “I have for many years felt convinced that the time had arrived for the Government to try to introduce some distinction for those who can show hereditary services before the Humble Company’s rule in India ceased. I have often said that I should be proud to wear a Copper Order, bearing merely the words ‘Teesri pusht Sirkar Company ka Naukar’ (Third generation Company’s servant).” A feudal aristocracy was created whose generations ruled post-independence governments. Some pirs and mashaikh (religious leaders) even quoted verses from the Holy Quran to justify allegiance to the Englishman (amir), after loyalty to Allah and the Messenger (PBUH). They pointed out that the Quran ordained that ehsan (favour) be returned with favour. The ehsan were British favours like titles (khan bahadur, nabob, etc), honorary medals, khilat with attached money rewards, life pensions, office of honorary magistrate, assistant commissioner, courtier, etc. A Tiwana military officer even testified in favour of O’Dwyer when the latter was under trial. Ayub Khan added the chapter of 22 families to the aristocracy, a legacy of the English Raj.

About 460 scions of the pre-partition chiefs along with industrial barons created in the Ayub era are returned again and again to the Assemblies. They do not allow agricultural incomes, industrial profits or real estate to be adequately taxed.

Economic advisor’s view of the economic malaise

In his book Growth and Inequality in Pakistan: Agenda for Reforms (pages 383 to 403), Hafiz A. Pasha has unwound the tangled skein of Pakistan’s economic malaise. He laments that income-and-wealth-tax rules and regulations are so drafted as to facilitate `state capture by the elite’.

The tax-concession-and-exemption laws” give special privileges to different vested interests. The privileges are in the form of “preferential excess to land, bank credit, etc, which facilitate faster accumulation of assets”. He visualises “elite “as “the conglomeration of rich powerful people in society”.  Among the “elite state captors”, he includes “large land-owners, defence establishment, multinational companies, urban property developers, and owners, and so on” (page 383, ibid.).

Large landowners

To Pasha, this group has, since partition, enjoyed tax privileges, like exemption from income tax on agricultural incomes (now devolved upon provinces after the 18th amendment). There are only 13,438 landowners (with average land holding of 435 acres) constituting only 0.2 per cent of the population of farmers in the country. The large landowners own about 11 percent of the whole farm area (Agriculture Census 2010).

Under the pressure of the International Monetary Fund, a tentative agriculture-income tax was imposed in the Punjab and Sindh exempting holdings of 12.5 acres. The maximum tax rate was Rs. 250 per acre for farms exceeding 25acreas. It yielded only about five per cent of the average net incomes per year.

Later the tax was imposed on net incomes exceeding Rs. 300,000. Income up to Rs. One lac was tax-exempt. The revenue from this tax during 2017-18 was paltry Rs. two billion equivalent to only 0.07 per cent of the net income from crops.

Agricultrue income is a tax haven

The potential  revenue from agricultural income is Rs. 103 billion (based on 2017-18 Gross Domestic Product) if it is treated at par with urban tax income.

Water charge (abiana)

The water charge is one-tenth of the actual cost incurred by the government. (Rs, 15 billion).The water charge is less than Rs 100 per acre.

Wheat and sugar subsidized procurement

Procurement price of wheat, at Rs. 1300 per 40 kilogram, is 25 percent higher than the price of imported wheat (Rs. 90 billion provincial subsidy). The concession on agricultural incomes, low water charges and high procurement price added over Rs, 200billion to the incomes of large farmers’ ‘.

Government barred from undertaking land reforms

A 3-2 vote judgment of the Shariat Appellate Bench of the Supreme Court of Pakistan in the Qazalbash Waqf v. Chief Land Commissioner, Punjab case on August 10, 1989 (made effective from March 23, 1990) blocked land reforms in Pakistan. It uncannily strengthened feudal aristocracy. Pakistan can’t do away with all jagirs as did India way back in 1948 because of the afore-quoted judgment.  Mufti Muhammad Taqi Usmani writes in his lead judgment:

“ 1. … Everything in the world actually belongs to Allah and he has granted humans the right to utilize them within the limits of divine laws. … There are certain obligations on the person who uses the land. The right to property in Islam is absolute, and not even the state can interfere with this right.

2. Islam has imposed no quantitative limit (ceiling) on land or any other commodity that can be owned by a person.

3. If the state imposes a permanent limit on the amount of land which can be owned by its citizen, and legally prohibits them from acquiring any property beyond that prescribed limit, then such an imposition of limit is completely prohibited by the Shariah.”

The two dissenting judges, Nasim Hassan Shah and Shafiur Rahman argued that a limit on land holdings was necessary to reform society and alleviate poverty.

Could our parliament reopen the case to align it with its dream of a Medina welfare state? Medina state, like Singapore, owned all land. Are jagirs a divine or a British gift? How did the filthy rich, the feudal lords and the industrial robber barons come into being? If accumulated wealth in a few hands is rooted in wrongdoing, a considerable chunk of it should be mopped up. Peek into the pre-partition gazetteers and you would know the patri-lineage of many of today’s Tiwanas, Nawabs, Pirs, Syed, Faqirs, Qizilbashs, Kharrals, Gakkhars, and their ilk. Taqi Osmani overlooked that a feudal aristocracy was created whose generations ruled post-independence governments. Read Zahid Hussain’s article, `House of feudals’, in the April 1985 issue of Herald. Is it anathema to look into the origin of land grants or wealth accumulation in public interest? Why not tax them heavily to fund basic needs of the downtrodden?

Defence Establishment

According to Pasha, “the lump sum budgetary allocation for defence in 2018-19 is Rs. 1492 billion this is equivalent to over 30 per cent of the total projected federal current expenditure budget for the year (p.385. ibid.).

A critique of Pasha’s view

A bitter lesson of history is that only such states survived and were able to strike a balance between constraints of security and welfare. Garrison or warrior states vanished as if they never existed. Client states, living on doles from powerful states, ended up as banana republics. We should at least learn from the European security experience. In Europe, potent external threats forced weaker states to coalesce.

History shows some states collapsed suddenly while others decayed gradually. Just think of what great status were empires like Austria-Hungary, Spain, Portugal, the Netherlands, Sweden and Tsarist Russia (exposed to the 1917 revolution) and even the erstwhile USSR.

A common feature of all strong states had been that they had strong military and civil institutions, de jure capability to defend their territory and policies that favoured the citizenry rather than dominant classes — feudal lords, industrial robber barons and others.

India’s rising defence expenditure ratchets up Pakistan’s defence outlays. Unless India lowers its defence outlay it is difficult for Pakistan to reduce its defence expenditure.

Conclusion

Factors contributing to Pakistan’s economic malaise are obvious. However political will to grapple them is lacking. 

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Economy

Central Asia: Potential and Opportunities of Investment

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Central Asia is a heart of the world and in order to control the world, the region should be under the control of a power. Historically, it is tied with its nomadic and silk route. It is a crossroad for the movement of people, goods, and ideas between Muslims land and Europe, China and India. In the 19thcentury, there was a competition between Britain and Imperial Russia to establish influence in the region and it might have been an effort for global balancing. The influence of British gradually rose while Russia declined with the humiliating defeat by Japan in1905. After the World War I, Imperial Russia collapsed ironically and was able to re-infuse itself as USSR with Central Asia as five provinces. From the World War II, USSR controlled Caucuses and Central Asia and was able to preserve its dominance in the region until 1991.Post disintegration of USSR, Central Asia appeared in to five autonomous states Kazakhstan, Kyrgyzstan, Turkmenistan, Uzbekistan, and Tajikistan that are land-locked and require the cooperation of neighboring countries for accessing world markets. The region, which is located in Eurasia and heartland, increased its geopolitical importance. The Region is volatile in nature with Kazakhstan and Turkmenistan only having relative stability. Although they have shown some economic growth, the other Central Asian economies are slim and petite.

Governance in the regional states has been continuously showing elitist pattern with being less responsive to popular aspirations. There is a constant factor in their foreign policies, which is the quest for security and for economic advantage. At the social level, the influential criminal groups have grown across the region, with rampant corruption, narcotics, poverty, and terrorism threatens all five states in Central Asia. Much of the state apparatuses are inherited from socialism- literacy, workers, infrastructure etc. The force structures and military thinking, inherited from soviet, is not compatible with modern Western systems. Contemporary Central Asian leadership has three primary concerns: maintaining power, fighting internal resistance and of development of autonomous economy..From the strategic prospect, the region is significant for geopolitical interest to China, Russia and United States. The region of estimated proven natural gas reserves are 232 trillion cubic feet comparable to Saudi Arabia. Kazakhstan and Turkmenistan possess about 100 trillion cubic feet and Uzbekistan 65 trillion cubic feet, Region’s oil reserves are 17.49 billion barrels. Kazakhstan has regions ‘largest proven oil reserves.

Central Asia states are seeking investment but the international community is more focusing on geopolitics than investment. The regional sates are pursuing cooperation and opportunities among themselves. The improved political cooperation and stability among Central Asian states also has opened opportunities of investment growing economies particularly for China and India. The region has two trump cards of educated youth and abundance of natural resources with stale and secure environment for foreign investors. The two rapid growing markets China and India are interested in the regional energy and mineral resources. Both the countries have developed close relationship with Central Asian states. Post reforms era, China has made progress in investment driven model for the manufacturing and investment beyond the border. Therefore, China has vast scope of investment in Central Asia. ‘OBOR’ project is a game changer investment of China in the region has introduced the region as a transit corridor for the Asia, Europe and Russia.

The region has promising investment potential in the fields of petrochemical, agriculture and tourism. These three sectors have low-level of foreign direct investment but with the great determination and priority of governments, it may be boasted. The region has a verity of petrochemical and agriculture commodities and raw material for processing to value the regional economy. The region also has potential to serve in both domestic and international meat market. Italy has invested in beef industry of Kazakhstan and has been earning much from several years. Another area of investment is a textile industry, which has immense opportunities of cotton and wool production. The Central Asian states have the same Soviet past but follow different directions for development aspirations.

Tajikistan is a more attractive country for the cross border investors due to its favorable environment for investment. The government is directing foreign investment to install new industries and modernize old industries. Aluminum, cotton, energy and tourism reveal potential of investment and attract foreign investors toward Tajikistan. The foreign direct investment in Tajikistan has increased from $270 to 317 million in 2018. According to the report of United Nations Conference on Trade and Development, Foreign Direct Investment stock in the country was 42.7 billion in 2018.The major investors are China, Russia United Kingdome and America have invested in energy and banking sectors. Chinese companies are investing in agro, tourism, hydropower and steel production sectors of Tajikistan. From the last two years, it has invested more than $3 billion in the country. According to the report of Chamber of Commerce of Tajikistan, China wants to create industrial enterprise with progressive technology and equipment.

Kazakhstan is the largest economy of Central Asia, which shares 70% of total investment in the region. According to National Bank of Kazakhstan, the foreign direct investment has increased by 9.8% with the amount of $4.1billion in 2018. The main areas of investment are transport, mining, trade finance, information technology, communication and insurance. Last year, 17.2% investment in fixed asset has increased. A significant growth in industry 27.1%, construction 20.6%, real estate 20.1% and agriculture 14.2% is also calculated. The government has arranged a list of $10.6 billion projects and has made legislation in permit system, taxation and custom system to attract investment in the country. The migration and visa process has been relaxed and the citizens of 62 countries can and travel Kazakhstan easily.

Uzbekistan has introduced visa for three years sin march 2019 for the participant of foreign investment companies. Furthermore, the foreign investors who invest more than $3billion can get residence permit for ten years. Within a one day, a certificate of origin of goods will be issued to foreign traders. With the participant of international financial institutions, 89 projects were launched in 2019. Then 31 project of more than $3billion are also planned with the help of World Bank and Asian Development Bank. Banks are able to open account for those who are Uzbek residents and businessperson with the requirement of FATF.

Turkmenistan is isolated country of six million people with rich natural gas reservoirs. The government tightly controls any foreign activities monitoring very closely. Visa system is very complicated but the businesspersons and investors are frequent. The business environment does not support foreigners because Turkmen language has long been in isolation. Therefore, businesspersons have to rely on English language for the business activities in Turkmenistan. However, international investors have shown their interest in investment and trade with Turkmenistan. The country has potential of investment in the sectors of agriculture, energy, construction and transport. The Foreign Direct Investment stock was $36 billion in 2018 of 81.6% of GDP. China, Russia, Uzbekistan and Kazakhstan are the main investors in Turkmenistan. Due to development of market economy, Turkmenistan has planned to raise investment in fixed assets $65.72 billion by 2025, which will facilitate manufacturing sector and will create many jobs in the country.

Kyrgyzstan is the landlocked, mountainous with an economy of agriculture, minerals and reliance on workforce abroad. Cotton, wool and meat are main agricultural products. Other sources of income are gold, mercury, uranium and natural gas. The country attracts foreign investment in construction of dames, mining, gas production and agriculture sectors but most of the investment goes to mining industry but due to conflicts between local population and investors in few districts of Kyrgyzstan the flow of investment decreased. The country is facing few challenges to the Foreign Direct Investment, the economy minister Oleg Pankartov has stated, “main problem is the lack of land plots to implement investment project due to limited resources”. He further added, “there are difficulties of land transformation and limited energy capacity and poor infrastructure”. That is why; the Foreign Direct Investment flow decreased 31.5% in 2018. The main investors in Kyrgyzstan are Britain, China, Canada, Kazakhstan and Russia. In 2019, the World Bank reported the rank of the country is 70th out of 190 countries. Kyrgyzstan is among those who have made progress in terms of investment and protection. The trade with neighbor countries has boasted. However, the country has wide potential in investment, to make contract and of payments.

In short, Central Asia is a top investment destination in the world. The most investment is in the natural gas, hydrocarbon and metal sector to extraction, processing to transportation. The other destinations for Foreign Direct Investment in the region are service sectors real estate development, agriculture, trade, communications, labor, expertise, technology, manufacturing and infrastructure development. China, European Union and Russia are major investors in the regional countries. Chinese investment is growing quickly in all economies of the region. Other key factor of investment inflow is the rate of return on investment that seems positive. In other words, to get long-term benefit from the investment, Central Asian countries must allow investors to benefit too.

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Major impediments to Pakistan’s economic growth

Pakistan’s economy is, currently, faced with myriad problems.  These problems have been compounded by inconsistent and erratic economic policies followed...

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