Page 17 - Accountant Jan-Mar 2019

Where is Pakistan on the global investors’ map? It is low on priority, high on risk, and not too high on the returns either – mainly due to its high cost of doing business, inefficiencies, low purchasing power of most consumers, and poor brand image. and many, many more. The list is quite long. For context, most valued company – on the basis of its cheap labour India attracted close to $40 billion in investment, placing it and technical expertise. Amazon still doesn’t think it has a among the top 10 in the list. place in the sixth most populous country in the world. For a country that is in its eighth decade, it boasted only three Yet, when it comes to actual market size – determined carmakers operating as assemblers/manufacturers inside plainly by the population at first – Pakistan is among the its boundary. That has, however, changed in the last few most populated. It is not like as if the need of Pakistan’s years. Where is Pakistan on the global investors’ map? 207 million people are different from the rest of the world. So how come a huge market and a location that would It is low on priority, high on risk, and not too high on enable exports to several countries through the Arabian the returns either – mainly due to its high cost of doing Sea isn’t tempting enough? The answer lies deep within business, inefficiencies, low purchasing power of most Pakistan’s complex socio-economic situation, which has consumers, and poor brand image. landed it out of investors’ good books. Political wrangling has caused Summary of foreign investment in Pakistan (in million US dollars) investors in Pakistan to remain 3,000.00 2,851.30 on their toes. In an environment, 2,500.00 2,234.00 where policies are introduced 2,000.00 1,905.20 1,985.60 without much intellectual 1,500.00 1,042.40 1,000.00 debate – either on the news or 500.00 parliament platforms – adhocism 0.00 FY15 FY16 FY17 FY18 FY19 (July-Jan) rules. In 72 years, only two governments have completed their As other countries in the region, most notably China, India, terms, and inconsistent policymaking has remained Singapore and the UAE improved their infrastructure, put a hallmark. Even if a stand has been taken, it has in policies that attract investors, Pakistan struggled to find been taken back with equal swiftness. A case in point its balance. It faced a choice – go for development with a would be the ban on non-filers buying motor vehicles. long-term view or ponder over its next move long enough Introduced by the previous government, the move was to be stranded in terms of the development race. No prizes meant to encourage the filing of tax returns so that for guessing what choice the country eventually made. the government, suffering due to Pakistan’s low tax- to-GDP ratio, would reduce a part of its deficit. Barely Nationalisation and its poor execution were key issues a year later, the successive government has notified a that took the country back many years after it displayed complete reversal, citing encouragement for investors and promise till the early 1970s. Businesspersons, discouraged customers alike. at government policy, were happy to take their money out. Corruption inside the country did not make it easier The point here is: if the plan was to increase tax receipts, either. Costs of production inflated as a layered system of did the move really pay off? If it didn’t, and we know it kickbacks, bribery and old-fashioned inefficiencies meant couldn’t have in a year, why take the move back? If it did, Pakistan lost several years. The end-result: the country then why reverse a move that was paying off? Political failed to recover. wrangling has caused investors in Pakistan to remain on their toes. In an environment, where policies are At the same time, other countries kept developing, and introduced without much intellectual debate – either on innovating. China was able to attract Apple – the world’s the news or parliament platforms – adhocism rules. January - March 2019 The Pakistan Accountant 15