Investment heaven

Interior Minister Ahsan Iqbal, while addressing a conference on China-Pakistan Economic Corridor, claimed that Pakistan has rapidly emerged as one of the top five emerging economies in recent years in the world and the world is admitting it. He said that in the eyes of media Pakistan is no longer a place of danger. The same media which declared Pakistan as safe heaven for terrorism is now calling it an emerging economy and safe heaven for Chinese investment which have topped the chart in foreign direct investment. The minister emphasized that the country had got third opportunity for take stage of economic growth since its inception and its new identity is only because of CPEC.  He said we have wasted 70 years to tape our coal resources but now because of CPEC coal reserves are being exploited which will cater to country’s energy requirements for 400 years.

It was four days after the meeting of Interior Minister with the US Deputy Secretary of State Jhon Sullivan, Senators and members of House of Representatives in Washington that the United States, the UK, Germany and France moved a resolution to the intergovernmental organization, the Financial Action Task Force to put Pakistan back on the grey list of money laundering and terror financing. A week-long plenary session of this international watchdog has started in Paris wherein the proposal to put Pakistan back on the list of countries which have failed to prevent terror financing. If the resolution is adopted then foreign investors will not take the risk of investing in Pakistan. Likewise, foreign banks will also face difficulty to deal with corporate clients and may pull out. Moreover, the multilateral lender agency of the last resort the International Monetary Fund will also be reluctant to provide a bail out package like 2013 to enable Pakistan to pay its external debt and alarming current account deficit liabilities. Another discouraging factor scaring away foreign direct investment is the World Bank’s Ease of Doing Business Index which ranks Pakistan at a lowly 147th position among 190 countries. This index is mostly used as a guide by foreign investors to learn more about the country. The complex tax structure of mostly regressive indirect taxes is also an impediment in fresh investment. There are 56 annual taxes that companies have to deal with.

No doubt Pakistan requires significant foreign exchange reserves but the Gawadar Free Trade Zone would not give a breakthrough as Chinese Yuan will be the sole legal tender for foreign trade excluding other major currencies including the US dollar, European Union Euro and British Pound. Pakistan has accepted the China’s condition in the 7th JCC meeting to give Yuan the status of sole legal tender in Gawadar Free Economic Zone. Pakistani importers and exporters are not even interested to use Yuan in bilateral trade with China. They did not participate in the two times auction of Yuan arranged by the State Bank of Pakistan. The imminent currency war between China and the United States will make it more volatile in foreign trade. Moreover, Iran has leased out its east coast port of Chahbahar to India. This port is 90 kilometer away from Gawadar ,and after getting its operational control, India will make it a hub of trade activity for itself, Iran, Afghanistan, CentralAsian States and some countries of Caucasus region.

CPEC was mainly a connectivity project but the PML-N government converted it into largely an environment polluting coal based thermal power generation project. Most of the 13 thermal power stations will be run by imported coal from China and the coal reserves in Jhelum district of Punjab and Thar area of Sindh will not be exploited on a large scale as per the agreements with private sector companies of China. It was also agreed in the 7th JCC meeting that a revolving fund will be created in commercial banks to make advanced payments to Chinese Companies for the purchase of very expensive electricity from them. It was reported in the national media that Chairman WADA disclosed before the National Assembly Standing Committee on Water and Power that Diya Mir Basha Dam has been withdrawn from CPEC framework because Chinese terms of financing were against the national interest. Some major rail-road projects envisaged in this framework are swinging between hope and despair. Construction work on certain road projects in Khyber Pukhtunkhwa and Baluchistan hit snags last year and now the fate of expansion and refurbishment of 1782 kilometer Peshawar-Karachi railway track M-1 is in dole- drum. The environment for foreign direct investment is not that attractive as is being painted by the PML-N government.