The United Arab Emirates and Saudi Arabia are expected to provide investment of $25 billion, which is undoubtedly welcome news for a country short of the foreign exchange it needs to service a considerable debt, but which raises a set of questions on its own. The first is that of timelines. The expected investment will be made in the next three to five years. This flow is not necessarily going to match Pakistan’s debt servicing needs, but will be determined by the investors’ needs. That the investment is coming through the Special Investment Facilitation Council is not necessarily reassuring to investors, who would like to deal with a permanent government, not the caretakers presently in office. With the absence of an elected government, there is no guarantee to the investor that the SIFC will continue to be as dominant as it is today.
What is happening is that businessmen are being asked to invest in a cash-strapped country, with no knowledge of whether there will be foreign exchange available to repatriate profits. The country is hardly an investment magnet anyway, and there seems to be no assurance that this investment will lead to the generation of exports, and thus to the sort of relief Pakistan needs to service its foreign debt. This investment may bring many benefits, but it does not seem to offer, except in a very convoluted fashion, the sort of structural reforms that Pakistan needs to be able to compete globally in the future. One of the most immediate questions, for example, is where the investor is supposed to get the skilled labour needed for these investments.
The sort of triumphalism being shown makes it seem as if the pleasure of bringing in these investments has made stakeholders in the SIFC forget the more immediate tasks which would make Pakistan a more attractive recipient of investment, as well improve its ability to service the humongous debt it has accumulated. This would include things like tax reform, proper supervision of foreign exchange dealers, investing in education and healthcare so as to have an educated and healthy workforce, and so much more. FDI is good, but is not enough alone for the country’s problems. For that, there has to be a source of foreign exchange large enough and reliable enough to pay off the country’s debt. It does not seem that the investment coming in will do that.
