The SIFC And The Promise Of Economic Revival

The authorities in charge of the SIFC need to invite major scholars, professionals and policymakers who have the requisite knowledge, experience and wisdom to collaborate and help the state establish a clear roadmap for the project's success

The SIFC And The Promise Of Economic Revival

The SIFC (the Special Investment Facilitation Council) is not the first body created in good faith to address Pakistan's economic issues and usher in prosperity by utilizing the country's assets and natural resources. Let us hope that the SIFC does not disappoint us like its predecessors or other entities, including statutory bodies, which aimed to attract investments from foreign and local investors.

Let us explore how to create a robust policy and concessions framework to attract investment, which is deemed necessary to revive Pakistan’s economy.

The private sector acknowledges the importance of expert advice. It possesses the necessary training, appetite, and financial capacity to engage experienced consultants and advisors. The private sector spends considerable time and resources in determining the technical and financial viability of projects. All private sector decisions are based on necessary due diligence and upon confirmation that a minimum return on investment is assured in a project that is selected for investment.

The 28 projects identified under SIFC, particularly those related to mining, energy, and privatization, require careful review and structuring. Creating a win-win situation for both the State and investors is a challenging task, and only experts can balance these competing interests.

It is important to note that we need cash, and not just foreign direct investment, per se. The experts know already that for most of the projects a significant portion of the foreign investment was used towards purchase of goods and services from outside Pakistan. This has been true for investments made since 1990s in the oil, gas and power sectors. As an example, how much out of the large CPEC-investments has been received and retained by the State Bank of Pakistan in forex reserve? Very little.

The privatisation, which is one of the focussed areas of SIFC, of certain assets including the PIA, the distribution companies and Pak Steel Mills, in a transparent manner is likely to fetch dollars which we need to increase our forex reserves. The catch, however, is on what terms should we sell these assets? And how do we make sure we do not allow the investors to exploit these acquisitions, without disincentivising them to buy these assets and turn them around for mutual benefit?

Why are we not talking about SEZ (special economic zones) anymore? What is the fate of various SEZs launched or supposed to be developed via the second phase of CPEC? Significant investments, including the unprecedented CPEC investment in the energy sector, were made on the basis of utilising such energy to establish industries and create economic activity to produce and export our products to earn dollars for ourselves and, more particularly, to be able to repay the principal amounts of investments as well as returns thereon. Unless we create industries and human resources to enable them to earn foreign exchange for Pakistan, we will keep borrowing money (assuming there are lenders out there all the time) to pay previous debts and committed returns thereon. Why can’t we enable our entrepreneurs and youngsters to be trained on war-footing basis to replicate the Indian model of earning substantial amount of dollars via IT exports of goods and services? It is sincerely hoped that with Dr. Umar Saif as the IT caretaker minister, some concrete actions would be taken at the earliest to exploit the IT and software potential within Pakistan.

Atif Mian, a distinguished economist of Pakistani origin, has repeatedly said that it is naïve to lure loans and equity investments in foreign currency without simultaneously planning to earn sufficient amount of dollars through exports to be able to pay off all such investments. The surplus capacity in power generation today, which is choking our economy, could be a blessing if we had (or can have) export-oriented industries which would consume electricity on 24/7 basis. It appears the decisions are taken in haste, without the necessary due diligence or expert advice. Why is there no consistency? Why do we keep changing our priorities? How are the CPEC phase 2 investments dovetailed with the objectives and scope of SIFC?

It is essential to tap into the wisdom and experience of experts. Many economists and financial experts are passionate about Pakistan and want to contribute to its prosperity. Efforts should be made to reach a consensus. Any policy or concessions framework offered to investors should not be formulated or announced without transparent agreement or at least the majority of experts' concurrence following a serious effort to consider everyone's views.

Most experts discuss the necessity of a 20-25 year runway for a country like Pakistan to turn things around, ensure sustainable growth, and break free from the International Monetary Fund's grasp. While some scholars and experts advocate against knee-jerk reactions and short-term policies, others recommend quick and drastic decisions alongside long-term plans. For example, Syed Shabbar Zaidi has proposed the elimination of 5000 rupee currency notes, a track-and-trace system for dollars and prize bonds, confiscation of untracked dollars and instruments, closure of shopping malls at sunset, a ban on importing luxury vehicles, a ban on using vehicles with engines of 2000cc or above, and immediate measures to curb all forms of smuggling from Afghanistan and Iran.

"The government must ensure that agreements with foreign investors are transparent, accountable, and prioritize the nation's interests," writes renowned columnist Farrukh Saleem. He further emphasizes that "Pakistan should negotiate agreements that promote technology transfer, allowing the nation to develop its expertise in the copper industry rather than relying solely on foreign expertise." He is absolutely right. Such rational voices must be heard.

Why can't the authorities, including SIFC, invite major scholars, economists, and professionals with the necessary knowledge, experience, and wisdom to collaborate and help the State of Pakistan establish a consensual and clear roadmap?

Just as we missed previous opportunities, we should not, in 15-20 years, regretfully say that we should have conducted more thorough research (read obtained experts' advice in formulating policies and concession frameworks) before offering our assets or resources to foreign investors via SIFC or any other means.

The writer is a Senior Partner at RIAA Barker Gillette.