Prime Minister Shahbaz Sharif has stated that promoting foreign investment is the government’s top priority. The business and trade community is being provided with excellent facilities through the One-Window Operation of the Special Investment Facilitation Council (SIFC). He expressed these views during a meeting with a delegation of influential British business figures.
Currently, Pakistan’s economy is moving in the right direction. While economic reforms are necessary, investment is essential for escaping the debt trap and achieving sustainable economic stability. As long as the economy remains dependent on loans, improvement will remain out of reach.
To strengthen Pakistan financially, we need to promote trade and improve our financial affairs. Pakistan is currently working on strengthening trade relations with friendly countries.
In this context, the SIFC was established to reduce business costs, set up new industrial clusters, and harmonize policies to attract investment, especially from friendly countries like Qatar, UAE, and Saudi Arabia. The council started work immediately upon its formation, and has already facilitated investment agreements worth billions of dollars, with more agreements expected.
Trade ties with various countries are being enhanced, including with Russia, which is significant. The Chinese government is pleased with Pakistan’s commitment to CPEC projects, while relations with Russia are also strengthening rapidly. Pakistan and Russia are currently trading in oil and gas, with trade between the two nations having increased by 25-30%.
Despite challenges, Pakistan has traditionally attracted foreign investment due to the strategic importance and development potential of multiple sectors. Energy, particularly power generation, oil, and gas exploration, has attracted substantial investment. Foreign investment in renewable energy sources is also growing. Recently, the telecom sector, especially mobile networks and internet services, saw notable foreign investment.
Major telecom companies are still interested in investing in Pakistan. Infrastructure development, including roads, bridges, and urban projects, has attracted foreign investors, while CPEC has been a major driver of Chinese investment in various infrastructure projects. Textiles and garments, among Pakistan’s largest industries, have historically drawn foreign investment.
Foreign investors are interested in Pakistan’s large workforce and its status as a major cotton producer. Banking and financial services have also attracted direct foreign investment, which is critical for supporting other industries and promoting economic growth. The IT sector also has considerable potential for foreign investment, while mining for coal, copper, gold, and gemstones could prove a significant source of investment.
Certainly, Prime Minister Shahbaz Sharif is keen on reviving and strengthening the economy. He has frequently visited foreign countries to promote economic recovery, most recently returning from a highly successful visit to Saudi Arabia. Substantial investment from Saudi Arabia and the Gulf is expected in energy, particularly renewables, oil refining, mining, food security, banking, logistics, water supply, and waste management.
To assist with Pakistan’s economic challenges, Saudi Arabia had previously deposited $2 billion in the State Bank of Pakistan, providing some relief to the rapidly declining foreign exchange reserves. Additionally, there are expectations of Saudi investment of up to $1 billion in Reko Diq. Pakistani officials have stated on multiple occasions that significant Saudi investments are expected in the coming years in sectors like minerals, finance, environment, agriculture, transportation, IT, tourism, and more, aiming to increase the Pakistan-Saudi trade volume to $20 billion.
Saudi Arabia is also taking steps to increase direct rice imports from Pakistan over the next five years. Through agreements with well-known Pakistani companies, Saudi Arabia aims to source agricultural products directly from Pakistani farmers, delivering them to Saudi consumers at lower prices. Investment and cooperation are being explored across various business sectors, including construction services, IT, food, textiles, and financial services.
A major reason for Pakistan’s low economic freedom is the excessive government spending, largely funded by debt. This leads to increased public sector involvement, which hinders private business, restricts market dynamics, and misallocates resources. A prime example is the agricultural sector, where preferential tax treatment has fostered stagnation and inactivity, harming more productive sectors of the economy.
Currently, Pakistan faces severe economic challenges, including rising prices for food, gas, and oil. The war in Ukraine has driven up global fuel prices, while past poor governance failed to recognize that low productivity per capita compared to other developing nations with similar income levels would lead to balance of payments crises. As a result, the country was unable to generate sufficient foreign exchange to fund imports.
Rescheduling debt is crucial to managing these issues. Increasing tax revenue through an expanded tax net and tax reforms, alongside reducing internal debt, unnecessary government spending, interest rates, and inflation, is essential. Continuous efforts to improve the business environment and address current challenges are necessary, and policy consistency must be ensured.
Bringing more foreign investment into Pakistan is key to addressing economic issues. However, attracting investors is challenging for politically unstable countries. Pakistan needs political stability to overcome these monumental economic challenges. Alongside traditional diplomacy, Pakistan must prioritize economic diplomacy under the current circumstances.
In this regard, all of Pakistan’s foreign missions should focus on attracting investment. It is hoped that these integrated efforts will lead to further economic improvement in the country in the coming days.