Amid concerns related to contract enforcement, tax refunds and intellectual property implementation in the country, foreign investors and members of the Overseas Investors Chambers of Commerce & Industry (OICCI) have indicated positive investment plans for the next few years, despite issues of security, access to energy and governance.
This was among the key findings of the 2011 Perception and Investment Survey launched by the OICCI on Thursday.
The survey, conducted every other year, has collected data from OICCI members only. The OICCI represents investors from 33 countries with a presence in 14 sectors of Pakistan’s economy.
The OICCI president emphasised that the survey findings should be taken seriously, as they represent the collective voice of foreign investors who play a leading role in Pakistan’s economic growth by contributing about 22 percent of the total tax collection and 29 percent of the GNP.
Nearly all the members who participated in the survey intend to continue operating in Pakistan, and two-thirds of the respondents indicated an intention to expand operations.
Over 45 percent of the respondents plan to invest more in the next 4-5 years as compared to the corresponding past period, and 59 percent of respondents plan to increase their headcounts.
The positive business plans revealed show an expectation of some economic stability and a modest improvement in Pakistan’s economic growth parameters. Total investments indicated by the respondents amount to approximately $3 billion over the next 2 to 5 years, which, though an improvement over the past, is well below the potential and opportunities in the country.
In terms of business prospects, over 80 percent of respondents perceive an increase in sales and 66 percent expect their profits to go up. This is expected to increase the contribution to the national exchequer, provide better employment opportunities and have an overall positive impact on both the economy and the society.
A sizeable percentage of respondents perceive Pakistan to be better or the same for ease of doing business compared to eight other countries whose macro-economic indicators over the recent years have been far better than Pakistan. For example, 36 percent respondents said that ease of doing business in Pakistan is either better or the same as in India. When asked to rate various aspects of doing business in Pakistan, OICCI members were positive about areas like repatriation of profits, access to local finance and efficient corporate governance. However, feedback was quite critical of several areas like getting tax refunds, clarity/fairness of laws and regulations and protection of trademarks and Intellectual Property Rights.
Commenting on the report, the OICCI president said that foreign investors operating in Pakistan are concerned with the law and order situation, the biggest challenge facing the business community, closely followed by short energy supply, political instability and high inflation.
A large number of OICCI members perceived the government policies as favourable, but 79 percent were critical of policy implementation.
This was an improvement over the 2009 survey, when over 86 percent respondents were dissatisfied with policy implementation in the country. Foreign investors were highly critical of the authorities concerned as 82 percent respondents believed the government is aware of the issues facing the investors, but 91 percent say it is not serious in resolving them. Improved two-way trade with India was viewed favourably as a business facilitator by 60 percent respondents, while 39 percent respondents indicated that the Revised 2011 Afghan-Pakistan Transit Trade Agreement is positive, provided it is properly implemented.
Devolution of various matters, previously held by the federal government, to the provinces under the 18th amendment was seen to have no significant impact by most respondents, apart from pharmaceutical companies that indicated they were worse off. The levy of the Sindh Development and Maintenance of Infrastructure on imports continues to be a big issue for businesses based in Sindh as it contributes to the increased cost of doing business in the province. It may be noted that a similar tax does not exist in other provinces.
The OICCI president was hopeful that through important and unbiased feedback presented in the 2011 Perception and Investment Survey, the authorities responsible would take it upon themselves to systematically address the weak areas identified and help put the country back at a high level of economic growth and development.
