It has been a dry spell for Foreign Direct Investment (FDI) in Pakistan. The country had received a meager amount in 2015. Pakistan has traversed through turbulent times especially owing to uncertain political situation, law and order and above all relatively unstable exchange rate. The Islamic Republic of Pakistan needs an innovative and unique strategy to attract FDI especially in the wake of CPEC. The economic cooperation between China and Pakistan is a means to progress and prosperity, it does not promise long-term benefits to the economy without identifying and capitalising on the opportunities arising from its implementation.

In addition to the long list of academic factors attracting FDI, Pakistan has to develop capacity-training labor with different vocational/technical skills and identity, and formalise, regulate commodity supply chain and opening up mineral mines to foreign and domestic investors. Some issue that can impact this are listed below.

Pakistan’s private and state assets

Chinese companies are showing keen interest in broad range of assets in Pakistan. Biggest of them so far is a proposed acquisition of 66% stakes of K-Electric with a price tag of a whopping US$1.7 Billion. PSX has also sold 40% of stakes to a Chinese consortium. Chinese state companies are actively pursuing infrastructure upgradation of railway tracks with planned investment of US$ 5.8 Billion. The Government of Pakistan is charting a fresh framework for privatisation of state owned assets. An Iran based consortium is showing interest in Pakistan Steel Mills (PSM). Addition to the above, Chinese investors are keen in investing/purchasing assets of various private groups in Pakistan. Executed carefully, state asset sale will fetch US$ 40-50 Billion in the next three years.

Developing human capacity

Capacity building will create more jobs and safeguard the brain drain from Pakistan. At present, Baluchistan holds a population of eight million with a low literacy rate. Skilled labor will place plays very important role in bringing FDI to any country.

Commodities alignment with CPEC

A conservative estimate of the value of Pakistan’s minerals is approximately over one trillion dollars. These minerals include sulfur, coal, coal, chromite, barytes, marble, limestone, quartzite and iron ore, gas and oil. The Provincial Government of Baluchistan is actively pursuing bids from local and international players to bid for exploration rights for up to 99 years of lease. At current price levels, chromite has an estimated market of US$23 Billion annually. Cumulatively, the value of raw minerals reserves at current price levels is around US$ 300 Billion annually.

Looking beyond Pakistan’s boundaries

The Economic Corridor will connect China and Central Asian States with the Middle East and Africa. Cumulatively both these sectors (the Middle East and Africa) represent 1.3 billion humans with an average growth rate of 5%. Better understanding of these regions will help Pakistan’s economy optimally capitalise on opportunities arising from CPEC.

The Middle East has eighty million people with a higher per capita income (US $41,000 approximately). The region is rich in hydrocarbon reserves but has food security concerns. Based on better affordability and purchasing power, it is currently importing over 90 percent of food products from EU, UK and the Americas. Arab Governments are actively investing in agriculture regions to secure their food supply for foreseeable times. Mostly investors are purchasing land in African countries due to red tape and infrastructure issues in Pakistan. If CPEC is executed effectively, it will definitely create investment avenues in the agriculture sector. Pakistan provides an ideal hub (soil quality, weather conditions and geo-strategic advantage) for agriculture businesses (both production and value added products).

Prices of food commodities are on the rising trend due to higher population (estimated nine billion by 2050) and rise of urbanisation is forcing agri-land shrinkage.

Africa has 58 countries, mostly poor nations of the world, and has over 1.2 billion people to serve. China has been playing very pivotal role in developing the continent’s infrastructure. China sees Africa as the largest export market by 2050. Much of the trade between Africa and China is currently being routined through the South China-Indonesia route (17,000 Km).

With CPEC fully functional, the distance between South-East China and heart of Africa will be reduced to 9,000 Kms.

Steps for Pakistan Government to

capitalise on CPEC

Following policy guideline is necessary

1. Steady Exchange Rate and low interest rates

2. Law and Order (Much improved already)

3. Energy Capacity and Infrastructure

4. Establishment and promotion of export/trade zones

a. Mineral Processing Zones – For Chinese Buyers

b. Agriculture Processing Zones- For Middle Eastern Buyers/Investors

5. Developing Human Capacity

6. Financial Inclusion – Enhancing banks liquidity to self-finance projects

Things are moving in right direction and macro-economic indicators are showing positive progress. Corporations are sitting on piles of cash with relatively younger management and above average risk appetite. I believe Pakistan is in a take-off position and such a geo-strategic advantage has never been witnessed in the history of mankind where one nation is about to reap fruits as a result of its location.