Putting money behind Pakistan’s diverse sectors makes sense

Pakistan has seen a six per cent rise in foreign direct investment (FDI) from the United Arab Emirates from $113.7 million the previous fiscal year to $120 million the one that ended in June this year. The South Asian country seeks to foster inward investment offering a climate that is getting friendlier to businesses. The improvement is shown up in the country’s 28 places upward movement from 2019 in the World Bank’s Doing Business 2020 rankings.

Investors from the UAE can invest in all major sectors of Pakistan’s economy, especially manufacturing, hydro-electric power, textile, transport, automobile, information technology, food processing, housing and construction, communication, agriculture and social services. During a visit of His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, Prime Minister Imran Khan had asked the UAE to invest in oil and gas, logistics, ports and construction sectors. And an almost untapped sector is tourism. Rich in its tourist destinations, Pakistan offers a diverse range of choices for tourists. Home to one of the oldest civilisations in the world, several locations of scenic beauty, world’s highest mountains, many religious and historic places, unique arts and crafts and a rich culture and heritage, the country has a plethora of opportunities for investment in tourism.

Strategically located to become Asia’s premier trade, energy and transport corridor, Pakistan has been consistent with liberalisation, de-regulation, privatisation, and facilitation. Special Economic Zones’ law has been made to meet the global challenges of competitiveness to attract FDI envisaging to reduce processes. The country, with a relatively open formal regime, permits wholly-owned subsidiaries with 100 per cent foreign equity in most sectors of the economy. In education, health, and infrastructure, total foreign ownership is allowed. In agriculture, the threshold is 60 per cent but in corporate agriculture farming 100 per cent ownership is allowed. Most foreign companies operating in Pakistan are “private limited companies” incorporated with a minimum of two shareholders and two directors registered with the country’s Security Exchange Commission.

Pakistan’s policies — Automotive Policy 2016, Strategic Trade Policy Framework (STPF) 2015-18, Export Enhancement Package 2019, Alternative and Renewable Energy Policy 2019, Merchant Marine Shipping Policy 2019 with 2020 updates, Electric Vehicle Policy 2020-2025, and Textile Policy 2021 — offer sector-specific incentives such as tax breaks, tax refunds, tariff reductions, dedicated infrastructure, and investor facilitation services. Foreign investments are not subject to higher income taxes than similar investments made by Pakistani citizens.

In September, a Sharjah-based budget airline, Air Arabia, set up joint venture with a Pakistani conglomerate to establish Fly Jinnah, a low-cost airline serving domestic and international routes from Pakistan. The new airline would help Pakistan’s travel and tourism sector and contribute to the country’s economic growth and job creation. Sheikh Nahyan bin Mubarak Al Nahyan, UAE Minister of Tolerance and Coexistence, said earlier this year that the Abu Dhabi Group would enhance its investments in Pakistan. The UAE has also expressed an interest in investing in Pakistan’s seaport projects, according to a Pakistani minister. A UAE firm is to build Pakistan’s first polypropylene plant. UAE’s real estate giant Diyár Homes is also poised to invest $30 million in Pakistan’s second largest city Lahore. The UAE Ambassador to Pakistan Hamad Obaid Ibrahim Salem Al-Zaabi has also expressed his country’s keenness for furthering its investments in Pakistan’s energy, agriculture, health and construction sectors, and Special Economic Zones. “Pakistan should improve its legal framework and formulate more business-friendly policies to attract more FDI from the UAE,” he suggested.

Making efforts to improve its business climate, Pakistan aims to grow FDI from across the world to $7.4 billion by fiscal year 2023 from $2.56 billion in fiscal year 2020. The security situation has improved. More than 60 per cent of the country’s 220 million population in the 15 to 29 age group represents an enormous human and knowledge capital. Working-age populations should be provided education and training so that they take part in the manufacturing sectors. Lengthy dispute resolution processes, poor intellectual property rights (IPR) enforcement, inconsistent taxation policies, and lack of harmonization of rules across Pakistan’s provinces also need to be done away with. Putting money behind Pakistan’s diverse economic sectors promise great gains for the UAE!

Waqar Mustafa is a journalist and commentator based in Lahore, Pakistan

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