Navigating Pakistan’s Economic Turbulence Through the Lens Of SIFC

As Pakistan’s foreign reserves continue to succumb to its economic, political, bureaucratic and policy fallouts, the country’s path to economic recovery, debt relief, policy sustainability and development prospects looks tricky. The state’s foreign reserves stand today at staggering $3.5 billion whilst its external debt and liabilities plummeted to cave at PKR 63.9 trillion by the end of December, 2022 depicting a rise of 23.5%.

While the volcanic state-of-affairs is lunging headwinds to state’s economic voyage, its development ventures still propose the lighthouse in the face of staggering debt torpedoes. After structuralizing Land Information and Management System (LIMS-COE) to optimize the cultivation of some 4.4 million hectares of uncultivated irrigable land, the country has organized yet another economic venture as a pathway towards developmental sustainability and connectivity.

In order to boost its trade and economic connectivity internationally, Pakistan recently launched Special Investment Facilitation Council (SIFC) with the target of increasing Foreign Direct Investment (FDI) to the country to magnanimous $100 billion in the short span of three years. The organization is developed as a single-window interface to cope up with the state’s investment hurdles post by red tape, discourteous licensing and regulatory authorities and inconsistent economic and investment policies. Due to such malevolent practices, FDI in Pakistan has stagnated at around 1% of the GDP for a decade now

The purpose is to “ensure policy predictability, continuity and effective implementation to revive the economy”, Prime Minister Shehbaz Sharif said post apex committee meeting of the organization as he stressed the need for “creative ideas” to solve economic problems. The projects tend to target five key areas of economy, namely IT, agriculture, mines and minerals, defense and energy sector.

Hailing the project as a game-changer that will revolutionize the scope of FDI and bring about profound transformations in Pakistan’s economy, Chairman P@SHA, the apex IT industry platform explained that contemporarily licensing for setting up new industries or businesses may involve as many as 20 No-Objection Certificates (NOCs), up to 18 months and countless visits to state’s authorities, demotivating investor’s seal and confidence in the system.

With the penultimate goal to earn $ 1 trillion in terms of national GDP by FY35, SIFC’s streamlining business ventures offers positive prospects and hence regional and international states are meticulously eyeing on navigating strategically to the prospects being offered. Sources said that the apex committee was expected to meet this week and clear some projects for Saudi Arabia and Qatar. A delegation of investors from Saudi Arabia is also likely to visit Pakistan by the end of July and before that SIFC has to fine-tune its proposal.

This marks the promising kick-off to begin with as facilitative and incentivized investment has prospects of becoming a substitute for country’s staggering high dependence on International and bilateral creditors for keeping its economy afloat. It also offers opportunity for other states to explore investment avenues in the state that offers cornucopia of in-situ resources, cheap labor, developing and hence flexible technological market and strategic connectivity from Central to West Asia to Middle East. The country is 5th largest in terms of younger population whereby 64% of nation is below 30 and hence offers immense labor potential. With GDP’s share of 50% coming from service sector and advancements in AI, Pakistan becomes an attractive destination for exploring investment avenues, industry expansions, MNCs and Business-Process Outsourcing (BPO).

However, it is up to the state to ensure systemic organization, continuity and strategic efficacy of the scheme to ensure due gains. It was reported recently by the sources to The Express Tribune that some $400 million was needed to establish SIFC Secretariat in PM office but Finance Ministry instead called for re-appropriation measures due to financial constraints and called for Board of Investment (BOI) and PM office to fill in for the amount.

Responding to a question, SIFC Executive Committee chairman Ahsan Iqbal said the BOI and PM Office both could jointly share the fiscal burden of SIFC.

These are those economic and institutional restrains hamstringing SIFC’s ability to reach full potential.

Also the world of globalization is an era of survival of the fittest. It shall be made sure that any foreign investment into the country shall not impede the latter’s domestic industry or potential that should not fall victim to any external market/product/service/resource dominance. In the year 2022, Pakistan saw entrepreneurship worth PKR 700 million only. It is strategic for SIFC to target private sector as well as private-public joint ventures collaboration with any incoming foreign investment or venture into the country. So that the domestic relevance is attained, maintained, highlighted and sustained, rather than outpouring resources to International market only that while generating short-term gains will produce long-term fall outs, detrimental to both state’s economy, social and national stature.

Separate branches for corporate law firms and internal/external products audit shall be maintained to avoid such episodes as those of Reqo Diq conflict that caused Pakistan losses to the tune of $ 11 billion, only avoided after renewed agreement with Barrick, running the project. The penalty was imposed by ICC International Court of Arbitration for denying lease to the company post-2010. Pakistan has annulled the agreement as it was signed illegally without federal endorsement and also because the foreign company involved started reaching out settlements with other foreign enterprises regarding the project without federal endorsement by Pakistan.

Hence, a proper audit and strong corporate firm branch becomes the pre-requisite for ensuring country’s economic potential/prospects meet its national interests and obligation.

More the less, it is prudent to target both comparative as well as competitive advantage in terms of the project while the latter should be Pakistan’s ultimate destination.

Sana Hamid
Sana Hamid
Author is an IR scholar having experience working with two top notch think tanks, namely IPRI and SDPI. She has numerous articles in her credits. She tweets @sana_hamid_here