The Federal Secretary, Board of Investment Asad Rehman Gillani has said that a high-powered 250 member strong Japanese business delegation is due in Pakistan last week of September.
He was speaking at a meeting at the Lahore Chamber of Commerce & Industry. LCCI President Mian Nauman Kabir, Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq also spoke on the occasion.
The Federal Secretary said that the Japanese delegation is coming to identify available opportunities in various sectors. He said a delegation of Pakistan will visit Saudi Arabia on October 29-30 as the Saudi businessmen are keen to step into joint ventures with their Pakistani counterparts.
He said that Prime Minister Shahbaz Sharif has directed to remove all hurdles coming in the way of foreign direct investment. He admitted that the investment is not going according to the expectations and said that the political instability is affecting foreign and domestic investment.
He said that Special Economic Zones have a ten-year tax holiday and machinery can be imported tax-free for the industries in SEZs. He said that the procedure and rules & regulations for setting-up industries in SEZs under FDI are being made easier. He said that the business community will be taken on board once the draft in this regard is prepared. He hoped that the work in this regard will be completed by December.
The Federal Secretary informed the house that SECP is providing 9 licenses online to the corporate companies while the registration of companies is also being done online.
LCCI President Mian Nauman Kabir said that the business community has the reservation over the constant dip in foreign direct investment in the country. According to the State Bank Statistics, the net foreign direct investment in financial year 2021-22 stood at merely 1.87 billion dollars as compared to 1.82 billion dollars in 2020-21.
He was of the view that in order to deal with the current economic challenges, the level of net foreign direct investment in Pakistan needs to be enhanced to at least 10 Billion Dollars.
Mian Nauman Kabir said that in the first month of the current financial year i.e. July 2022, the net FDI was just 59 million dollars as compared to 104 million dollars in the same month last year. Going at this rate, it would be even difficult to maintain the level of FDI achieved during 2021-22.
He said that according to the State Bank data, our recent FDI inflows are concentrated in the sectors like Power, Financial Services, Oil & Gas and Communications. There is a great potential to attract FDI inflows in the sectors like construction, housing, tourism, food processing, logistics, value added textiles, automobiles and renewable energy etc.
He said that in addition to the FDI inflows, we also need to talk about local investment. The Total Investment as a percentage of GDP has been stagnant at around 15% for the last three years which indicates the lack of trust of our local investors in the economic system.
The LCCI President said that one can lay the blame on issues like law and order, macro-economic instability (due to rupee devaluation, inflation and policy rate hike), political volatility and energy shortages for declining trend in the FDI inflows but we must realize that these reasons will not be addressed or rooted out overnight. We have to find a way forward despite all these odds.
“We also need to be cognizant of the issues like inconsistency in our economic policies, particularly related to taxation and the lack of effective integration with the regional and global economy. As a result, we have seen FDI inflows to Pakistan have decreased over the past two decades against the global trend of investors focusing on and rushing to developing countries like Bangladesh and Vietnam etc.”, Mian Nauman Kabir added.
The LCCI President said that this scenario requires a complete review of our current investment policy regime. There is a need of a pragmatic and multi-dimensional investment strategy which should not only incentivize the local as well as foreign investors but also attract new investments across the diverse sectors of the economy. By focusing on Ease of Doing Business, there is a need to review old regulations with a Regulatory Guillotine and replace them with Smart/Prudent Regulations for facilitating Investors.
He said that the multiple taxes at the Federal and Provincial level act a deterrent for the Investors. For easing out the taxation regime for investors, there is need for harmonization of Taxes at the Federal and Provincial level (particularly Sales Tax and Labour Taxes like EOBI and Social Security) through better digitization and furthermore, we need to drastically reduce the number of taxes and the frequency of tax payments.
He said that in addition to the Ease of Doing Business, we also need to give an adequate focus on the Cost of Doing Business and make sure we remain competitive with other economies in the region in terms of policy rate, electricity tariff, gas tariff, land cost, fuel rates and transportation cost.
Mian Nauman Kabir also highlighted the issue of the lack of Investment in Special Economic Zones. There is a need to evaluate the performance of SEZs Act 2012. The SEZ Act looks at only the design and allotment aspects and ignores the financial and management sides. In China, the Special Economic Zones have ensured the viability of human resource through provision of facilities like education, health and vocational training. These gaps in the SEZ Act need to be addressed.
He mentioned that Pakistan has only 2-3 SEZs while 48 SEZs are established near Dhaka.
LCCI Senior Vice President Mian Rehman Aziz Chan said that the Lahore Chamber is not being consulted for policy making and has not given representation in the government boards and committees. He said that a charter of economy should be signed immediately. He said that due to tax exemptions in FATA and PATA, the industries in other parts of the country are facing difficulties. He said that the mining sector has a lot of potential but being ignored.
LCCI Vice President Haris Ateeq said that the Lahore Chamber should be given 2-3 thousand acres of land for the establishment of Special Economic Zones. He said that Export Promotions Zones should also be established throughout the country.