Security, investment, and bureaucracy
By Imtiaz Gul
November- 09- 2004, Daily Times
Security issues and tedious bureaucratic procedures have become the bane of our economy. To quote a European diplomat, ‘bureaucracy in Pakistan creates roadblocks as soon as an investor decides to put money in Pakistan’
Prime Minister Shaukat Aziz wants foreign investors to take advantage of the “conducive business environment” in Pakistan. Yet international entrepreneurs refuse to loosen their purse strings. The question is: why have foreign businesses decided to ignore Pakistan?
The first reason is obviously the security deficit in the country. We have witnessed the abduction and killing of Chinese engineers; the blast at a five-star hotel in Islamabad; and the attack on a gas field near Kohat, where a Hungarian-led team was at work.
Such incidents are a source of consternation for foreign investors. What makes these events even more alarming is the way that we normally indulge in damage-control exercises, presumably to secure our country’s image.
In the case of the Marriott Hotel blast, for instance, we made ourselves a laughing stock by telling the world that the explosion was caused by electrical short-circuit — an explanation that did not wash with anyone.
Just as we were trying to protect our image, Abdullah Mehsud threw a bombshell, claiming that it was he who was responsible for the blast.
On October 10, over a thousand Gurguri villagers attacked and ransacked the Gurguri gas plant location near Kohat, demanding an early supply of gas to their area. While the attack could have provided a catharsis of sorts for the frustrated villagers, it resulted in a suspension of work as well as the immediate evacuation of 140 people working for contractors and Pakistan Oil and Gas Co, a subsidiary of Hungary’s national oil and gas group — MOL.
Subsequently, the federal government intervened. A meeting was called to defuse the situation and work resumed after about a week. The government promised that Gurguri would get its gas supply in about six months.
MOL is a leading oil and gas exploration company. When something goes wrong with as influential a company as that, word spreads like wild fire. It is important to minimise the number of such incidents since they can easily tarnish Pakistan’s image abroad.
But if you believe that the security deficit is the only thing scaring off international investors from doing business in Pakistan, you had better think again. The Kohat incident coincided with Chancellor Gerhard Schroeder’s visit to Pakistan on October 10. He was accompanied by a number of German MPs who wanted to determine if ‘enlightened moderation’ actually prevailed in Pakistan.
The politicians were accompanied by prominent businessmen from that country. One of the top German businesses had been trying for some time to secure an appointment with Prime Minister Shaukat Aziz. With the chancellor’s visit, the company got its wish.
But the clamour about ‘the indifference of the Pakistani bureaucracy’ towards foreign investors reached its crescendo when special assistant to the prime minister, Salman Shah, disappeared 30 minutes into the second session of the Business Forum arranged by the Board of Investment (BoI) for the dignitaries. This certainly did not go down well with the Germans. “Pakistanis always use Siemens, AEG and big pharmaceuticals as a reference for investment,” said Klaus-Werner Jonas of the Social Democratic Party. “We are surprised why they refuse to create more space for small and medium enterprises [SMEs] which form the backbone of German and other Western European economies. Here [in Pakistan] we hardly see any real and private SMEs, even though they are vital for economic development.”
I heard a similar anecdote regarding President Pervez Musharraf’s visit to Italy, where the BoI had arranged an international investment conference. Shortly before the event started, the audience were told that the commerce secretary was unable to reach the venue and deliver his presentation on the state of Pakistan’s economy and the potential it offered investors. So, a low ranking official, with a less-than-satisfactory command of the English language, gave the presentation instead. Although President Musharraf did attend the conference, he was obviously unable to provide investors with an overview of the country’s economic position as well as answer technical questions.
If we want foreign businessmen to come to our country, we need to take them more seriously. Our officials and ministers must deal with them respectfully and try to address their problems. As the situation stands, however, foreign diplomats dealing with economic cooperation and trade issues, often complain about the prevailing ‘bureaucratic quagmire’ that is the nightmare of any businessman.
That explains why the German chancellor stressed the importance of concluding the Investment Promotion and Protection Agreement (IPPA), while addressing the Business Forum in Pakistan.
According to a German delegate, “Pakistanis have been dragging their feet on the issue of international arbitration contained in the IPPA draft.” Another German official pointed out that “the issue of legal protection is one of the primary matters for German investors, and the Pakistani government which looks so keen to attract foreign investment must really move quickly to remove this hurdle.” If Prime Minister Shaukat Aziz can nudge the tedious and reticent bureaucracy into dealing with international entrepreneurs properly, Pakistan is likely to receive investments from at least three big German firms within the next year or so.
But security issues and tedious bureaucratic procedures have become the bane of our economy. To quote a European diplomat, “bureaucracy in Pakistan creates roadblocks as soon as an investor decides to put money in Pakistan”.
The writer is a freelance columnist. Email: vogul1960@yahoo.com