Home-grown strategy essential

January 13, 2019

Our PM is reported to have expressed relief upon hearing the latest trade deficit figures. The finance ministry has also issued a statement on the day the data came out showing a sharp fall in the trade deficit last month, claiming that the measures taken in their mini budget in September have firmly taken hold and are now effectively curtailing imports as per policy regime of the government. It should be a matter of satisfaction for the PTI leadership that a number of countries are willing to sign MoUs for investment, beginning with one on industrial cooperation with China last month. While MoUs are not legally binding they could be the first steps towards a legal contract.  Unlike treaties, they take a short time to ratify and if during the talks it is discovered that one of the parties had very different ideas of how the business should be built, it can wriggle out without any legal consequences. MoUs for Saudi investment worth over $10b will be signed this month while those with UAE in February. Four Malaysian firms are also due this month supposedly to invest in four sectors — halal meat, gemstone, information technology and hi-tech education. As the investments will be made in various provinces it would be helpful if a prior approval is secured from the provincial governments. These governments should also have a role in the oversight of these projects’ implementation. One welcomes the idea of requiring all foreign firms to invest in joint ventures with domestic firms. There is a dire need however to avoid the type of conflict of interest that many saw in the award of the Mohmand dam. Although Pakistan holds promise for several major investors, but they confront major disincentives also. Absence of better law and order and ease of business has been spelled out by the BOI chairman. Others were pointed out by Chinese ambassador Yao Jing. Among the constraints that hinder foreign investors, he said, are inconsistent policies, high taxes, no tax incentives and lack of business-friendly environment. This is why while relocating their businesses from the US Chinese investors prefer to go to India or Indonesia. By having foreign exchange inflows friendly countries and the first favorable data on the trade deficit in the month of December, the government has undoubtedly earned itself a moment of respite from the economic pressures it inherited. But it would be a mistake to see this as anything more than a momentary lull in the powerful headwinds that the economy has been facing. Finance Minister Asad Umar’s saying that recourse to the IMF may not be required and the government may work on a home-grown strategy of adjustment instead is fundamental to realizing the set goals.

 

As the investments will be made in various provinces it would be helpful if a prior approval is secured from the provincial governments.