SIFC must become an enduring investment mechanism which will continue through any caretaker setup and future governments to ensure economic revival. Continuity is paramount to maintaining investors' interest and confidence. There is no room for complacency. SIFC has a big task ahead, but it is the gateway to success to attract the investments needed for a stable and prosperous future.
Pakistan has come a long way in its first 75 years. From its first day as an independent, sovereign state on August 14, 1947, it has had to build its future almost from scratch. With a population of only 33 million in East Pakistan, it had no large industries and less than 50 factories that employed less than 30,000 people. Agriculture was not in great shape. There was no central bank, no Constitution, no ordnance factories to cater to the defense needs of the new armed forces and law enforcement agencies, and little to sustain the country for the future. There have been challenging times, but the achievements are significant, though sometimes overlooked.
As Pakistan heads into the last quarter of its first century of nationhood, the time has come to take decisive steps to build on the achievements, shake off old thinking and outdated processes, to bring economic development to sustainable levels of prosperity. If the country is to become a modern developed nation competing in a global market, a substantial shift towards investment is needed to establish a robust and practical framework for economic revival.
Attracting significant investment has remained challenging. Investors consider all aspects of country risk when making investment decisions. Topping the list are critical factors, including political stability, security, macroeconomic stability, and a robust business-friendly legal and regulatory environment. Until now, Pakistan has struggled to meet these critical investment criterias. There is no doubt that the potential is substantial, but the legal and regulatory mechanisms to attract investment have been lacking.
Pakistan's economic challenges are not new, but recent global and domestic shocks, including COVID-19, the Ukraine war, and the 2022 floods, have exacerbated the impact. Security imperatives also form a crucial part of the country risk analysis that all foreign investors conduct before committing. For countries like Pakistan with problematic neighbours and other security challenges, it is a serious question that requires the contribution of those who understand it best. Economic stability and security are closely linked.
The interrelation between economic stability and national security was reflected in the National Security Policy 2022-2026 (NSP), placing economic security as the core element of national security. The NSP recognises the interconnectedness of traditional and non-traditional aspects of national security and proposes a whole-of-government approach to charting a cohesive, unified, and responsive security policy for the coming decades. While conventional security focuses on defense, territorial integrity, internal security, and diplomacy, non-traditional security comprises broader elements that influence a country's economic health and citizen well-being.
As Pakistan heads into the last quarter of its first century of nationhood, the time has come to take decisive steps to build on the achievements, shake off old thinking and outdated processes, to bring economic development to sustainable levels of prosperity.
The NSP also states, "Turning Pakistan's national security challenges into opportunities requires a whole-of-government approach where all organs of the state work in close coordination to tackle increasingly complex and cross-cutting issues. Breaking silos and moving towards inter-departmental synergy is necessary to meet evolving requirements of comprehensive national security. This would invariably require a review of current coordination mechanisms and removing any barriers while incentivising collaboration to achieve overall objectives."
The economic situation has been alarming, with a possible default looming. A default would have been catastrophic for Pakistan and made the country vulnerable. However, after a shaky year to take some tough decisions to get the economy back on track, the government finally signed the much-awaited IMF loan agreement for USD 3 billion, higher than expected. The signing of the IMF agreement has unlocked other loans from friendly countries waiting for the IMF to be satisfied that the government had made the harsh fiscal changes to comply with requirements. New or rolled-over loans have since flowed from Saudi Arabia, China, and the United Arab Emirates. These loans signal a slight uptick in other countries' confidence levels that there has been an improvement in Pakistan's future economic stability. However, these loans will have to be repaid in the future and for now, they add to the debt repayment burden, and the risk remains. Pakistan has a long way to go to solve its economic problems, so strict fiscal discipline has to be maintained, and structural reforms must gather pace. Attracting substantial investment in key industries will be the real game-changer in reducing loan dependency, but tough decisions are involved.
The interrelation between economic stability and national security was reflected in the National Security Policy 2022-2026 (NSP), placing economic security as the core element of national security.
The new Economic Revival Plan unveiled by Prime Minister Shebhaz Sharif addresses the seriousness of the challenges ahead and provides a strategy for progress. The plan zeroes in on the untapped potential in key sectors which are individually future powerhouses of success. Attracting substantial Foreign Direct Investment (FDI) in agriculture, defense production, minerals and mining, information technology, and energy will enable Pakistan to stand on its own feet to be genuinely prosperous and move away from dependency on loans.
While the GCC and other friendly countries are the initial targets, a revitalised investment climate is likely to attract interest from other markets in the future. The target of USD 100 billion in FDI in the next three years sounds ambitious. However, it is achievable if policymakers apply sufficient attention and laser-like focus to overhaul and align the legal and regulatory system and other planning processes at both federal and provincial levels.
To ensure success, the Prime Minister also notified the Special Investment Facilitation Council (SIFC) to provide support and direction for implementing the Economic Revival Plan. SIFC will focus sharply on removing the barriers that inhibit significant investors from choosing Pakistan as the destination of choice for direct investment and joint ventures. When launching the SIFC initiative, the Prime Minister said, "The setup will shorten the cumbersome and lengthy business processes through a cooperative and collaborative whole of the government approach with the representation of all stakeholders. It is aimed at creating horizontal-vertical synergy between federation and provinces, facilitating timely decision making, avoiding duplication of effort, and ensuring swift project implementation." The objectives rightly identify the barriers that inhibit success. The entire initiative also aligns closely with the challenges and objectives identified in the National Security Plan.
Defense production offers vast potential for growth with investment from friendly countries and further access to the global defense market.
Also speaking at the launch, the Chief of the Army Staff, General Asim Munir, offered full support from the Army to complement the government's efforts for the Economic Revival Plan. He emphasised that the plan is fundamental to the socioeconomic prosperity of Pakistanis and to reclaiming the country's rightful stature among the comity of nations. The participants in 258th Corps Commanders Conference, presided over by the COAS in July, further reinforced the Army's full support for the government's strategic economic revival initiatives and the provision of all possible technical and management support for the overall good of the people of Pakistan.
SIFC will develop a comprehensive policy to strengthen and facilitate foreign investment and ease of business in the various sectors. The corporate sector and business commentators applauded the announcement as a good step in the right direction. The notification for establishing SIFC shows a three-tier system which fully reflects an authentic whole-of-government approach:
Apex Committee
▪ Prime Minister of Pakistan
▪ Federal Ministers (Planning, Development and Special Initiatives, Finance, IT and Telecom, National Food Security and Research, Energy (Power), Water and Resources, Industries and Production, Defense, Defense Production, and Investment)
▪ Chief of Army Staff–By Special Invitation
▪ All Provincial Chief Ministers
▪ National Coordinator (Pakistan Army)
▪ A Special Assistant to the Prime Minister to act as Secretary to the Apex Committee.
Executive Committee
▪ Minister for Planning, Development and Special Initiatives
▪ National Coordinator (Pakistan Army)
▪ Federal Ministers (Planning, Development and Special Initiatives, Finance, IT and Telecom, National Food Security and Research, Energy (Power), Water and Resources, Industries and Production, Defense, Defence Production, and Investment)
▪ Provincial Ministers (Agriculture, Mines and Minerals, IT, Energy, Board of Revenue, Irrigation, Finance, Planning and Development, and Investment)
▪ Special Assistant to the Prime Minister, SIFC Secretariat
▪ All Provincial Chief Secretaries
▪ Director General (Pakistan Army), SIFC Secretariat
▪ Secretary Board of Investment (Secretary SIFC Secretariat shall act as Secretary to the Executive Committee)
Implementation Committee SIFC Secretariat
▪ Special Assistant to the Prime Minister
▪ Director General (Pakistan Army)
▪ Secretary, SIFC Secretariat (BS-21)/Additional Secretary (Board of Investment)
Similar investment councils are a common feature of trade and investment strategies in many countries and inter-countries. It is only surprising that it hasn't happened in Pakistan before now. The membership of SIFC is large, but inclusivity is paramount to ensure the whole-of-government approach provides the required 'one-window' outcome. However, missing from the membership is representation from the corporate investment sector. To address this (and this may already be in the plan), SIFC could consider a high-level consultative forum of representatives from multinational corporations already present in Pakistan and local conglomerates to call on to share their perspectives when needed. This additional forum would add value to understanding current corporate foreign investment considerations.
Policies and plans require futureproofing involving foresight to prepare for the impact of sudden shocks that impact globally and domestically. SIFC could introduce a strategic foresight planning discipline across all levels of government when reshaping the investment environment.
The presence and support of the Army in SIFC add significant value to ensuring investor confidence in the broader national security aspects and continuity. The Army also brings substantial expertise in managing large operations, and technical capabilities, which will be enormously valuable to promoting Pakistan's investment potential. As sectors identified in the plan include defense production, information technology, mineral exploration and mining (which tends to be in sensitive areas of the country), and energy, there are security issues that all parties must consider. Significant investments also require No Objection Certificates involving security clearances to ensure each proposal is consistent with Pakistan's national interest. National interest vetting is a feature of foreign investment procedures in all countries and is accepted by investors as an integral part of the process.
The five sectors are well chosen. Investment to modernise agriculture will be transformative. The vast majority of farms are less than 12.5 acres, many smaller, and are barely capable of more than subsistence farming. Corporate farming and mechanisation, better land and water management, modern storage facilities and supply chain management will raise the sector to new efficiency, productivity, and profitability levels. Countries and multinational corporations are increasingly searching for new countries for their investments in food production, and Pakistan can benefit significantly. An enhanced agricultural sector also has massive domestic benefits in improving food security and reducing poverty, particularly in farming communities.
Defense production has achieved tremendous milestones over the years to achieve world-class credibility. Already involved in joint ventures with foreign countries and a growing export market, defense production offers vast potential for growth with investment from friendly countries and further access to the global defense market. The future of the Information Technology sector is exciting. Technology is an integral part of how we live and work today, and with investment, Pakistan's global potential for technology is unlimited. Minerals and mining have remained mostly untapped, yet the country is rich in resources. A reshaped investment climate will enormously benefit attracting significant investments to unlock this abundance of riches. The energy sector is critical to power the future and must be a high priority for investment.
The world is going through rapid change, rising uncertainty and unpredictability, creating challenges for governments everywhere. Therefore, policies and plans require futureproofing involving foresight to prepare for the impact of sudden shocks that impact globally and domestically. SIFC could introduce a strategic foresight planning discipline across all levels of government when reshaping the investment environment.
Strategic foresight planning differs from traditional strategic planning concepts in that the foresight approach focuses on the premise that the future is unknowable. However, planners can imagine it through regular scenario-based analysis of weak signs of emerging threats and shocks that could appear over the horizon and throw plans into chaos. A foresight approach would put Pakistan on the same page as most potential investor countries and corporations, most of which now use foresight planning to shape their policies and plans.
Policymakers across all levels of governments use foresight scenarios to challenge and overcome their current assumptions about the future and prepare for a broader set of anticipatory policies and plans. There are numerous and similar definitions of strategic foresight from many countries and organisations. The OECD puts it most simply: "Strategic foresight is a structured and systematic way of using ideas about the future to anticipate and better prepare for change. It is about exploring different plausible futures that could arise and the opportunities and challenges they could present."
Foresight is now a global feature of how most governments, corporations, and the United Nations anticipate, plan, and better prepare for an unpredictable future. Militaries have also used strategic foresight for centuries (more commonly called wargaming), so the concept will be very familiar to the Pakistan Army. Today militaries more widely adopt strategic foresight to develop and promote long-term understanding and awareness of the future security environment that informs military decision-makers. However, the approach is still uncommon in Pakistan.
It is worth noting that many countries from which Pakistan hopes to attract investment use strategic foresight concepts in their whole-of-government planning, and many have Strategic Foresight Centres established within their governments. International finance institutions, including the IMF, World Bank, Asian Development Bank, and others, use strategic foresight to monitor country economic issues and funding responses.
Major corporations like Shell, which has used it since the 1970s to evaluate investments and shape their portfolios for the future, were early pioneers in the corporate sector. The United Nations Department of Economic and Social Affairs considers that a foresight-based approach is instrumental in ensuring strategic policies and plans, such as national strategies, regional-level visions, local development plans, or frameworks for development cooperation.
Amongst governments, Singapore was one of the pioneers, having adapted research from their Ministry of Defense to the whole government in 1996. Closer to home, the United Arab Emirates launched its Future Foresight Strategy in 2017 to make foresight of the future a part of the strategic planning in the government. Strategic foresight centres can be found in government ministries and departments worldwide, including other Gulf countries, Turkey, China, Mongolia, South Korea, European Union countries, Australia, and the United States, to name just a few. There is logic in Pakistan adopting similar strategic foresight planning disciplines. Given the whole-of-government participation, SIFC seems to be the right avenue to introduce this into future planning.
Although elections are on the horizon, SIFC must become an enduring investment mechanism which will continue through any caretaker setup and future governments to ensure economic revival. Continuity is paramount to maintaining investors' interest and confidence. There is no room for complacency. SIFC has a big task ahead, but it is the gateway to success to attract the investments needed for a stable and prosperous future.
The writer is an Australian Disaster Management and Post-Conflict Reconstruction and Rehabilitation Advisor who lives in Islamabad. She consults for Government and UN agencies and has previously worked at both ERRA and NDMA.
E-mail: [email protected]
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