Sponsor: American Business Forum (ABF)
FDI levels in the country have fallen from a high of 5409 million dollars in 2008-2009 to 851.2 million in fiscal year 2014-2015. These number themselves were boosted by the selling of 3G and 4G licenses by the government which contributed a significant portion of FDI. Successive governments in Pakistan have made efforts to increase the level of Foreign Direct investment (FDI) flowing into the country. FDI is associated with a number of positive externalities such as are knowledge transfer, competition, privatization and deregulation. Foreign direct investment brings expertise that its employees can later adapt to any local ventures that they join. Foreign direct investment provide healthy competition to local concerns, which should lead to lower prices for consumers. FDI’s are supported by home governments which allow them to push against rent-seeking regulations in ways that no domestic business can. The main objective of this project is to find ways to increase or maintain the current level of FDI inflows in Pakistan.
This project has proposed that FDI can be increased by signing of bilateral investment treaties between Pakistan and its largest FDI partners. The availability of such forum would increase the confidence of investors to bring their capital into Pakistan for investment without any uncertainty. Furthermore, it has proposed that special policies may be formulated by the government that provide tax and investment benefits to individual prospective investors. The government should engage in targeted promotions rather than general ones so it can concentrate its efforts to secure large investors. Under Special Economic Zones Act, the provincial governments may set up Special Economic Zones (SEZs) in collaboration with private parties. SEZs provide a myriad of benefits to investors such as low or negotiable tax liabilities, waving of import duties etc. lastly the government may provide Islamic Finance benefits to prospective investors. Malaysia has been particularly successful in using Islamic Finance as a means to attract FDI. This model may be successful in Pakistan.