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Conducive Business Environment in Pakistan

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Sadia Satti
Training Associate
Sustainable Development Policy Institute

Pakistan is blessed with rich natural resources, ranging from potential sources of solar and wind energy to precious minerals, four seasons, more than a dozen agro-ecological zones, Himalayan peaks, a pristine coastal belt, and fertile plainlands. Natural endowment coupled with itsgeo-strategic location, its people, its investment-friendly policies, and economic resilience among COVID19 turns it a paradise for investment.

Pakistan, with a total area of nearly 800,000 square kilometers is the 36th largest country in the world. Its policy of peaceful co-existence and its geostrategic location provides any investor the opportunity for businesses in sectors such as agriculture and trade with technology giant China, energy-richCentral Asian states, and liquidity-rich Gulf States. Its Seaports in Karachi and Gwadar are important for the trading industry, especially the Gwadar port which is a transshipment port.

Pakistan has a population of 220 million people. It is the 6th most populous country in the world. Fifty-five of its population is below the age of 19, which bodes well for long-term sustainable economic growth. Most of them are digitally literate. A large part of themhasa good command of English. Pakistan’s wage market and currency exchange rates are regionally competitive. The minimum wage in China is at par with the average wage of a skilled worker in Pakistan. The young workforce also includes top talents as there are several high-level technical schools in Pakistan.

Another factor that turns Pakistan into a lucrative destination for investment is its emerging middle class. Currently, its middle class is estimated to be over 90 million people (more than the population of many European countries). It is one of the world’s fastest-growing retail markets and has attracted consumer brands from the world over.

Improved infrastructure through the China Pakistan Economic Corridor, digital connectivity (teledensity of 150 million people), and fintech mean that Pakistan is ready to embark upon the 4th industrial revolution and can be an important hub for software exports.

Pakistan’s economy has shown its resilience not only during the global financial crisis but also during the COVID19. In fact, Pakistan’s policy of smart lockdown was considered as one of the success stories by the UN. According to the Economist magazine’s latest normalcy index, Pakistan and Egypt were the two countries where outdoor life and economic activities had attained the pre-covid level.

Pakistan’s investment policies have been designed to provide a comprehensive framework for creating a conducive business environment for the attraction of FDI. Pakistan’s policy trends have been consistent, with liberalization, deregulation, privatization, and facilitation being its foremost cornerstones. Pakistan offers various grants and incentives to foreign investors. These incentives include tax concessions, double tax treaties, low-interest loans, etc. Foreign investment is protected here through Foreign Private Investment (Promotion and Protection) Act 1976 and the Protection of Economic Reforms Act 1992.

The Law of Special Economic Zones has been made to meet the global challenges of competitiveness to attract FDI. The law allows the creation of industrial clusters with liberal incentives, infrastructure, investor facilitation services to enhance productivity and reduce the cost of doing business for economic development and poverty reduction. The Law further envisages reducing processes through SEZ in Pakistan.

Most recently, the government has offered tax incentives in investment in the housing and construction sectors, and in the industry. Foreign investors should avail the benefit of these incentives.

Finally, Pakistan is a potential market for green investment. Its nationally determined contributions (NDCs) at UNFCCC COP26 (Glasgow) envisage that by 2030, sixty percent of its energy would be generated through renewable energy sources. Investment in green energy generation is just one component. On top off it, Pakistan is open for investment in eco-tourism, in electrical vehicles, in green bonds, and in afforestation.

Serving as a bridge between the global west, China, and the Persian Gulf, Pakistan is the heaven for investment. The government and the people of Pakistan are looking forward to welcoming potential investors.

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