To Make SIFC (Special Investment Facilitation Council) Successful, We Need to Use What We’ve Learned from the CPEC Authority
In an era where attracting foreign investment has become a global economic battleground, Pakistan stands at a crossroads. It faces the challenge of reviving its economy, bolstering investor confidence, and creating an environment conducive to business growth. This article looks into the intricate landscape of Pakistan’s investment climate by examining the three fundamental prerequisites that potential investors scrutinize.
Furthermore, it explores the potential role of the Special Investment Facilitation Council (SIFC) in addressing these concerns.
The Three Prerequisites for Investment
1. Assessing the Business Environment
First and foremost, potential investors meticulously examine a country’s business environment. They seek to comprehend the intricacies of its functioning, registration procedures, facilitation mechanisms, bureaucratic efficiency, and the overall governance system. This initial evaluation forms the foundation of their investment decision.
2. Demand for Policy Continuity and Stability
Investors are inherently risk-averse when it comes to policy changes. They gravitate towards regions with policy continuity and implementation stability, shying away from locations where policies frequently undergo abrupt transformations. This demand for policy predictability aligns with their long-term investment goals and risk mitigation strategies.
3. Security as a Paramount Concern
Security is a paramount concern for investors, both local and foreign. They meticulously assess not only the local but also the regional security situation for potential threats. A secure investment environment ensures the protection of assets, employees, and business operations, making it a non-negotiable criterion for investment decisions.
The Emergence of the Special Investment Facilitation Council (SIFC)
In light of these critical prerequisites, the establishment of the Special Investment Facilitation Council (SIFC) is perceived as a significant stride towards creating a more favorable investment climate in Pakistan. The SIFC is tasked with ensuring the continuity of policies, providing timely facilitation, eliminating bureaucratic hurdles, and, most importantly, offering a secure and conducive environment to investors.
The involvement of the armed forces in the SIFC is anticipated to play a pivotal role in policy continuity, streamlined implementation, and enhanced security. This collaboration brings to the forefront the importance of a secure investment environment in attracting critical investments.
Learning from The Role of the CPEC Authority
To pave the way for the success of the SIFC, Pakistan must draw valuable lessons from its economic history, particularly its experiences with the China-Pakistan Economic Corridor (CPEC) Authority. This entails avoiding the mistakes of the past and crafting a refined policy for executing envisioned plans.
Key Lessons from History
Historically, Pakistan has demonstrated its capability to formulate excellent policies, covering a wide spectrum of economic and security domains. However, the Achilles’ heel has often been the lack of concrete action plans to support these policies. The business environment remained inhospitable to investors due to various challenges:
Complicated Institutional Frameworks: Complicated institutional frameworks created confusion and inefficiency.
Complex and Lengthy Procedures: Protracted and convoluted procedures hindered the ease of doing business.
While Pakistan has made commendable progress in recent years on the ease of doing business index, significant challenges persist. For instance, the process of registering a company remains cumbersome, often involving multiple agencies. Delays in obtaining essential services such as electricity connections, construction permits, and property registration are common. Corruption remains a pressing concern within the bureaucratic system.
The Complex Tax Structure and Policy Inconsistency
Pakistan’s tax system involves a staggering 35 departments or agencies, creating unnecessary complexity. Provincial tax systems and legal requirements further compound the challenges. The lack of harmonization among provincial tax policies presents one of the most significant hurdles to attracting foreign direct investment. Policy inconsistency adds to the uncertainty faced by business communities and industrialists. Moreover, the industry bears the brunt of the tax burden, while the services and agriculture sectors often evade their tax responsibilities.
The CPEC Authority Case Study
To navigate the path towards the SIFC’s success, it is essential to draw insights from the experiences of the China-Pakistan Economic Corridor (CPEC) Authority. The CPEC Authority, primarily a facilitating and monitoring body, faced significant challenges:
Limited Decision-Making Powers: The CPEC Authority lacked decision-making and implementation authority, relying on politicians and bureaucrats for crucial decisions.
Frequent Changes in Status: The government frequently changed the status of the CPEC Authority, creating uncertainty.
Devolution of Powers: The 18th Constitutional Amendment devolved most powers to provinces, hindering the Authority’s smooth functioning.
Recommendations for SIFC’s Success
To ensure the SIFC’s success and to create a genuinely favorable investment climate, Pakistan must:
Establish a Genuine One-Window Facility: The country needs to offer a one-window facility that streamlines all processes, eliminating the need to navigate multiple agencies.
Limit Bureaucratic Influence: It is imperative to reduce bureaucratic influence and eliminate outdated technocrats, fostering a culture of efficiency and transparency.
Grant Decision-Making and Implementation Powers to SIFC: The SIFC should be empowered with decision-making and policy implementation powers, ensuring prompt and effective execution.
Appoint a Dedicated Head for SIFC: A dedicated head with the status of a federal minister should lead the SIFC, allowing them to focus solely on its objectives.
Create Robust Oversight Mechanisms: A high-profile evaluation and oversight committee should be constituted to assess the council’s work. This committee should comprise heads of major political parties, services chiefs, the chief justice, and should be headed by the prime minister.
A High-Level Monitoring and Evaluation Committee: This committee should meet annually to review the progress of SIFC programs and make necessary decisions. However, it must not have powers to interfere in the council’s day-to-day affairs.
The Urgent Need for Reform
It is evident that without substantial governance and business environment reforms, Pakistan cannot move forward. These reforms are not a matter of choice; they are a pressing need that demands immediate attention. The time has come for Pakistan to deliver tangible results on the ground, as mere speeches and promises will not suffice. If Pakistan fails to undertake these reforms, the SIFC, like previous organizations, may end up being ineffective.
Balancing State-Owned Enterprises and the Private Sector
Lastly, it is crucial to strike a balance between the private sector and state-owned enterprises (SOEs). SOEs play a pivotal role in generating revenue for the state, while the private sector focuses on individual interests. Therefore, the SIFC should not prioritize the privatization of SOEs but rather concentrate on improving their functioning.
Pakistan’s journey toward economic rejuvenation hinges on its ability to attract investments. The SIFC, with its promise of policy continuity, streamlined facilitation, and enhanced security, holds the potential to transform Pakistan’s investment landscape. However, this transformation requires a proactive approach, drawing insights from past experiences, and implementing comprehensive reforms. Only then can Pakistan unlock its true investment potential, foster economic growth, and secure a brighter future.