Incentives for Foreign Private Investment in Pakistan

By Kazi, Fazul Suleiman | Economic Review, September 1996 | Go to article overview

Incentives for Foreign Private Investment in Pakistan


Kazi, Fazul Suleiman, Economic Review


The present government is vigorously pursuing the objectives of further liberalizing the economy to encourage more and more inflow of direct private foreign investment, particularly in areas where it brings advance technology, managerial and technical skills and marketing expertise. The adequate legal framework for protection of the private foreign investment has been provided in the Foreign Private Investment (Promotion and Protection) Act of 1976.

Pakistan is a country of immense economic potentials and future promises, with new determined sense of purpose and direction. It can carve out for itself a place of significant importance in the developing countries. Pakistan enjoys a very central location in the continent of Asia. Its sea lanes and air routes allow it access to further enlarge its external trade in Asia, Middle East, Africa and countries far beyond.

Pakistan with its rich endowment of raw materials and arable land, vast mineral resources, entrepreneurial skills, abundant low-cost labour and huge domestic and foreign markets offers competitive advantage for foreign private investment. Pakistan offers opportunities and wide scope for investments in import substitution and export oriented agro-based products, electronics and high tech industries. Its sufficiently developed technological and industrial base, will be helpful in further fuelling of the industrial expansion of the country.

In his recent book, "The competitive advantage of the nations", Michael E. Porter has conducted in-depth study and analysis of Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, UK and US to know the reasons how these nations gained competitive advantage in particular industries and the implications for the firm strategies for the national economies. He states: "Every nation can improve its economic prosperity if it succeeds in relaxing the constraints to upgrading its industry. The government policy plays its role in the process, through mechanism such as regulations on foreign direct investment, exchange and import controls."

He contends that government policy should actively encourage an international outlook and export and should seek to avoid currency restrictions, restrictions on foreign investment and restrictions on the inflow and outflow of skilled personnel that impede internationalization. Recent announcement of a new package of economic reforms by the Government of Pakistan is a very firm step towards deregulation of economy to facilitate foreign private investment. New economic policy guidelines have removed most of the difficulties and the bottlenecks encountered by the prospective investors.

Broad objectives of the new industrial policy are:-

1) Provision of physical and social infrastructure facilities in the industrial estates as well as backward areas.

2) Development of key industries-biotechnology, fibre optics, solar energy equipment, computers and software, electronic equipment and fertilizers.

3) Creation of employment opportunities by encouraging labour intensive projects as well as small industries.

4) Balancing regional growth through dispersal of industries in the less developed areas.

Seventh Five-Year Plan Projects Private Sector Investment of US $4 billion

The present government is vigorously pursuing the objectives of further liberalizing the economy to encourage more and more inflow of direct private foreign investment, particularly in areas where it brings advance technology, managerial and technical skills and marketing expertise. The adequate legal framework for protection of the private foreign investment has been provided in the Foreign Private Investment (Promotion and Protection) Act of 1976.

Foreign private investment has been defined as a repatriable investment by a person who is not a citizen of Pakistan or holds two nationalities, including the Pakistani. It implies that investment by any Pakistani holding dual nationality shall be considered as a foreign investment. …

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