THE noise about the emerging investment scenario is said to have grown louder in boardrooms and lounges of elite clubs, but Pakistan’s private sector still seems to be waiting and watching the situation, though more closely.

There is a cautious approach to capital spending except for a few power projects that promise guaranteed returns.

Former State Bank of Pakistan governor Syed Salim Raza, while discussing the possibility of a surge in domestic investment, said the indicators so far do not suggest a major change in businesses’ attitude.

“There are positive vibes in business circles and people are closely watching CPEC-related projects. Beyond that, if there are major expansion plans or new projects on drawing boards, they have yet to surface,” he said over phone.

According to the SBP, net private sector credit off-take fell to Rs21.462bn during July-October against Rs58.377bn in the same period last year. The record-low interest rates have clearly, on their own, failed to push the business community into action.

So far, much of the capital spending has gone into business consolidation, which has been generally self-financed by investors. Some traditional manufacturing sectors are operating below their capacities.

Earlier, the Pakistan Economic Survey 2014-15 had reported a deceleration in the industrial growth rate. The industrial sector grew 3.6pc in the year, against 4.5pc a year before. Manufacturing, which contributes 65pc to the industrial sector, grew by a mere 3.1pc as compared to 4.4pc a year before.

Billionaires find it attractive to venture in the services sector, trading, informal segments and real estate, but they are reluctant to commit their capital to long-term manufacturing projects

According to the same report, the total investment-to-GDP ratio remained stagnant at 15pc. But private investment had actually declined from 10pc of GDP in 2013-14 to 9.6pc in 2014-15.

It has been observed that local billionaires find the country attractive for ventures in the services sector, trading, informal segments and real estate. But they are reluctant to commit their capital to long-term manufacturing projects, even though the country desperately needs an expansion in the industrial base to improve the pace and the quality of growth.

When contacted, some businessmen who head major conglomerates declined to comment on the record. But they attributed the low investment rate to a lack of factors like reliable physical infrastructure, security of investment, skilled manpower, sound judicial system, transparent regulatory framework and political stability, apart from lopsided taxation regime and abrupt policy changes.

But a senior economist at the Planning Commission dismissed the businessmen’s view as ‘lame excuses’ and a reflection of their myopic mindset and not-so-responsible social behaviour.

“Had the business environment actually been as bad as these tycoons project it to be, would they be in Pakistan rolling in riches? They had financial prowess to relocate their businesses anywhere outside their home country. If they opted for Pakistan, it was because they knew business would be harder and far less rewarding anywhere else,” he argued.

“It is difficult to assess their net worth because of the wide range of their business portfolio, but it is safe to say that most old business houses have multiplied their fortunes many times over in the last three decades. And the country has also seen the emergence of a new class of super rich tycoons in the media, education, health and real estate sectors,” he said.

“The point is that there is no dearth of resources and expertise. What the country lacks is the drive in the private sector to excel and compete and their trust on Pakistan as a country with a promising future. Instead of putting in place a policy framework to nudge private capital towards socially desirable areas, successive governments patronised them, which deepened their flawed approach,” he lamented.

Fahim ul Islam, member for private sector development at the Planning Commission, said the government was looking at the low rate of domestic investment as a key economic challenge and was actively working on several ideas to mobilise the local investor community.

“Besides several other initiatives to engage the private sector, the Planning Commission intends to soon convene a forum with leading businessmen to persuade them to boost private investment in the manufacturing sector,” he told this writer over phone from Islamabad.

Minister of State for Privatisation Mohammad Zubair defended the private sector, which, he felt, was keeping the wheel of the economy moving in adverse circumstances.

Commenting on the slow pace of investment in manufacturing, he expressed hope that the ‘economic turnaround’ achieved by the PML-N government would revive the private sector’s confidence in the future of Pakistan. This, he believed, was necessary to boost investment in long-term projects.

“By 2017, we hope to deliver on our promise of uninterrupted, affordable power supply and security. I am positive that given the right environment, the business community will assume the role it is destined to play in the country’s development,” he said.

Published in Dawn, Business & Finance weekly, December 7th, 2015