What Stops Overseas Pakistanis from Investing in Naya Pakistan?

Prime Minister Imran Khan’s vision for the economic revival of Pakistan greatly relies upon overseas Pakistanis investments; and of course he is not off the track. The diaspora remits $20 billion annually, which not only ranks Pakistan as the sixth largest recipient of worker remittances, but also constitutes 45% of the country’s annual net inflow. Believably, the govt. claims that we have not yet tapped even half of the potential of the overseas community, as the annual income of the 10 million plus diaspora is said to be around $49 billion.

Similarly, the govt. is rather more interested in convincing the diaspora for capital investment in Pakistan, as it helps generate employment and increase productivity of the corporate sector. However, Pakistan, as a system, has always lacked a workable plan to engage its diaspora in socio-economic and intellectual development of the country.

Having met and interviewed various overseas Pakistanis who either successfully invested in Pakistan or plan to do so, I see five major issues that have always been irritants for potential investors.

Lack of business-friendly environment stands to be number one. Pakistan has been ranked 136th on Ease of Doing Business Index 2018, which shows that the corporate culture has yet to be conducive for foreign investors. Although, some elements have shown progress e.g. initiating investment-friendly reforms and protecting minority investors, the overall condition is still extremely grim.

In cases of registering a property, paying taxes and trading across borders, Pakistan is ranked as 161, 173, and 143, respectively; among 190 countries. Overseas Pakistanis, including me, take all such indicators seriously and critically weigh our chances of success before venturing into investing in Pakistan.

Excessive taxation is another hurdle. Unless overseas Pakistanis and foreign investors are ensured good profits, they wouldn’t risk their valuable capital. A heavy taxation rate for foreign investors against a tiny tax net within the country is something that surely discourages investors.

During the previous government, SECP suggested tax reduction for foreign investors by proposing a three-year tax exemption of up to 15 percent and total exemption from taxes on investment holdings for longer than three years, but couldn’t get a positive node from the government.

Thirdly, if we couldn’t attract overseas Pakistanis to relocate to Pakistan, there is still a chance to convince them for venture capital investment. But unfortunately, there too we seem to have various problems; including lack of innovative business ideas, theft of intellectual property, and disinterest in investing in knowledge-based and top grossing sectors – real estate, farming, IT, energy, and construction and development.

Fourth, Pakistan’s economy is faced with multi-pronged challenges. From the core inflation rate of 7.6 to low GDP growth rate of 5.4, the country’s economic vision is always vulnerable to internal and external setbacks. Our export to GDP ratio is higher only to Yemen, Burundi and Nepal and lower than rest of the developed and developing world.

Nevertheless, even such volatile fiscal conditions which generally breathe by IMF’s bailout may be survived, but not the culture of bribery and corruption at the any level. According to Global Competitiveness Index 2017-18, Pakistan stands at 99^th position against India’s 69^th on a global index of corruption.

A common trend of undocumented extra payments and bribery to clear imports and exports; access public utilities; evade taxes; gain licenses and contracts and even obtain favorable decisions from public institutions has corroded the system for an ambitious overseas investor.

Lastly, but most importantly, we need to do policy reforms on immediate basis. To simply register a property, one has to go through eight different procedures against four of the developed countries; spend 208 days against 22 of the developed countries, and bear cost of approx. 4.2 percent of the total value of the property against zero of the top performing economies.

Furthermore, protection of labor, protection of capital, business ease, secure exit and investment strategies are some of the critical areas that need an immediate policy reforms. It would also help in mitigating the negative perception of the country, formed by unclear and inconsistent trade and investment policies.

Although, numerous investment opportunities are available in Pakistan, the Pakistani diaspora from across the world prefers to invest billions of dollars in Dubai’s real estate sector. It indicates trust deficit on both sides, for which the government has to redefine its approach and adopt concrete measures to protect the diaspora’s investment.

Overseas Pakistanis are a major contributor to national foreign reserves whose input in policymaking and implementation is not only necessary but highly productive. A formation of ‘Overseas Pakistanis Investment Council’ could thus be helpful where the diaspora’s representation could help the government develop efficient legal, regulatory, and institutional frameworks to enhance and protect investment.

As a matter of fact, nothing happens overnight. Anomalies have been identified and so are their viable solutions. All that is required is a modest yet serious approach towards practical measures. I personally see phenomenal potential in four distinct investment sectors of Pakistan where the diaspora have always been showing immense interest – real estate, SMEs, tourism and investment schemes, and surely these are the suitable options from where the new government could start overhauling the entire system.

It is highly welcoming that private sector is playing a vital role in revolutionizing procedural and transactional system of various industries. Particularly, the efforts of Graana.com to make real estate business more transparent and convenient are worth mentioning.