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Foreign investors to continue investment - Zameen News

Foreign investors to continue investment

November 20, 2008 • news

In spite of constant security threats in the country, 76 per cent of Overseas Investors Chamber of Commerce and Industry (OICCI) members have said that they would continue with the investment plans for the next two years, though 63 per cent foreign investors said that their expansion plans would be limited. However, 88 per cent of the 110 members who replied to the OICCI Perception Survey 2008 stated that the government’s efforts to control the law and order situation were not effective enough.

The perception survey was conducted by the OICCI between August and September 2008 and its report was formally launched on Wednesday at the chamber’s head office by its President Waqar A Malik.

Pakistan’s overall system of corporate governance was viewed as effective by 79 per cent of the respondents. With reference to the Federal Budget 2008-09, investors had mixed sentiments regarding its impact on business activities.

While half the respondents viewed it in positive light, the other half was not so optimistic and considered it a further drain on foreign investments. This stands as a sharp contrast to the previous year when 63 per cent of the investors saw the budget for 2007-08 in favorable terms.

In respect to the different ministries, the Ministry of Commerce, Communication, Finance, Economic Affairs and Foreign Affairs were termed to be the best performing bodies with 70 per cent of the OICCI members approving of their performance.

In contrast, the Ministries of Health, Water and Power and Law and Justice were the most unpopular with more than 60 per cent of the respondents deeming their performance as below average.

Moreover, with the exception of WAPDA, and Intellectual Property Organisation of Pakistan whose functions were termed unfavorable by at least 70 per cent members, all other bodies were considered satisfactory in terms of performance.

Financial institutions and bodies such as State Bank of Pakistan (SBP) with 58 per cent and Securities and Exchange Commission of Pakistan (SECP) with 62 per cent acceptance fared amongst the best institutions, whereas Federal Board of Revenue (FBR) and the Pakistan Telecommunications Authority (PTA) were also strongly appreciated.

However, even though 50 per cent respondents found Pakistan’s business environment to be better than other emerging markets around the world, the pharmaceutical and financial sectors preferred other emerging markets to this country.

Other than the pharmaceutical sector, the oil and gas sector also preferred other countries in the region of South Asia to Pakistan and this was mainly due to the circular debt issue that the country is currently facing.

On the other hand, an astounding 96 per cent of the OICCI members termed the internal law and order situation of Pakistan as the most pressing concern for foreign investors and a major impediment to Foreign Direct Investments (FDI) into the country.

Breaking down the ratio, out of 110 respondents, 101 termed the internal political situation as poor, 7 acceptable and only one member termed it good compared to last year’s statistics of 69 members terming it poor and the rest acceptable. The law and order situation was also termed poor by 106 members, whereas only 4 members deemed it acceptable with none ranking it good this year.

Meanwhile, 77 per cent of the OICCI members were strongly concerned about the implementation of policies in Pakistan, of which 18 foreign investors said that they may wind up their operations if the law and order situation persists in the country.

Worst still, 90 per cent of the respondents termed the rupee-dollar parity as a major impediment negatively affecting local businesses, whereas 72 per cent of the OICCI members expressed disapproval of the way the domestic economy was progressing this year compared to 50 per cent for the last year.

Furthermore, 62 per cent of the members also found the corporate tax rate at 35 per cent to be unacceptably high, amongst which, the pharmaceutical sector was the most disapproving.

On the issue of utilities, the availability of electricity was deemed almost as non existent as 109 members marked it poor against one member’s acceptable and none ranking it good.

Some of the recommendations that the survey brought forward by foreign investors were that corporate tax rate should be made comparable to the region, whereas strengthening of the domestic economy and improvement in policy implementation was also stressed upon by the investors.

The foreign investors identified five key areas that are a challenge for the government: law and order, political uncertainty, energy deficiency, cost of operations and infrastructure.

They also advised different ways to conserve energy and generate additional power.

As 86 per cent of the OICCI members said that the government has been inefficient in its efforts to improve the perception of Pakistan amongst potential foreign investors, they advised that the government should develop more aggressive and optimistic media campaigns, address the concerns of the business community in a more concrete manner and draft a more robust investment promotion strategy and implement it.

[Pakistani Housing News]