Why It Is Important for Pakistan to Focus on Foreign Direct Investment
Pakistan has been suffering from terrorism and a lack of reforms. At one time, Pakistan was considered the best Asian country in the 1960s, and Pakistan had the highest share of FDI (foreign direct investment) during the Ayub Khan era. At that time, Pakistan was the major ally of the United States, and the US stated that Pakistan was one of the best countries. However, the lack of reforms and inconsistent policies has led Pakistan to now be the least considered country in terms of FDI. Therefore, Pakistan has to seek ways to increase FDI, as cross-border is more than US$100 billion annually, and Pakistan does not even cross US$2.5 billion. Pakistan will have to work on reforms and strengthen laws and will be required to hire smart people at the bureaucratic level to reduce the hurdles that international investors face. For example, Chinese business personnel last year approached the Sindh High Court against the police and said that the police were asking for a bribe in exchange for security. However, the Sindh government intervenes and sorts out the issues. This is just one example, and there are many more that international investors face in Pakistan.
Every stakeholder in Pakistan will have to contribute if Pakistan wants to attract FDI. If Pakistan enables an environment for FDI, then Pakistan has the potential to at least attract USD 20-30 billion on an annual basis, which will not only help Pakistan to avoid taking expensive loans but also reduce Pakistan's external debt. Pakistan only relies on remittances and exports for dollar inflows; however, the majority of countries prefer FDI as the major source of dollar inflows. Pakistan cannot dodge the silver bullet, and it has to go through hard reforms, which will be painful in the short term, but their results will be visible in the long term. Pakistan has to focus on FDI if it wants to avoid and get rid of the IMF.
