Pakistan's Investment Crisis: Security, Politics, and Red Tape Scare Off Capital

The article lists the security situation as a major problem which has not improved for decades. "The country is ranked second on the Global Terrorism Index and the attacks are not receding. How is one supposed to invest in such a situation? Even domestic investors have shifted their capital to safe havens. Similarly, the law and order situation in the country is also forcing investors to move to safer avenues," the article points out.

For many domestic investors, the fear of political victimisation, combined with the lack of judicial protection, discourages them to invest. Political instability is a major hurdle. Political parties are after one another driven by vendetta and not by national interest. There is no long-term political vision for the betterment of the country.

Back in 1975, the investment to GDP ratio of Pakistan was approximately 17 per cent. After 50 years, it has decreased to 13.1 per cent, which is a serious concern that needs to be taken up by policy makers.

In the 1990s, Pakistan used to attract more FDIs than India, but the equation has flipped completely. For example, in 1992, Pakistan attracted $336.5 million in FDI, while India attracted only $276.5 million. Now the trajectory has completely changed; in 2024, Pakistan only managed $2.7 billion, while India attracted $27.1 billion, which is almost 13 times higher, the article points out.

Citizens witness strikes, lockdowns and closure of main roads for weeks, affecting businesses adversely. In developed democracies, there are consistencies of policy regardless whichever party is in the government. Regrettably, the case is different in Pakistan.

Likewise, regulatory burdens and red tape are another nightmare. Instead of facilitation, regulations are often used as a tool of control. Compliance is very time consuming. If someone wants to install an electricity or gas connection, he has to wait for months. If one wants faster service, then one has to grease the palm of the authorities.

Similarly, opening a bank account is a herculean task, providing endless documents like utility bills, proof of income and so on. Company registration takes even more long and hectic documentation. Why would someone put his hard earned money in a process full of hurdles? On top of that, repatriating money or profit is also a struggle.

The weak judicial system is often ignored while discussing the investment issue. A strong judicial system provides confidence to investors that his interest cannot be harmed by anyone. Pakistan judicial system is ranked 129 out of 142 on the World Justice Project. There is no quick mechanism for dispute resolution.

The courts are overburdened and inefficient having more than 2.3 million backlog of cases. A commercial dispute takes years and sometime even decades. If someone wants to trouble you, he will just file a fabricated case and it will take years to prove that there is nothing substantial behind it.

Then there are issues of infrastructure and policy inconsistency. Investors face electricity and power outages along with very high cost. To cope, many businesses have installed solar for power generation and every year there is a debate to tax their own generation.

The lack of policy consistency exacerbates the situation further. Many investors fear that today's rules will not survive the next budget. In such unpredictability, no one is ready to invest in the country, the article added.

- IANS