Caretaker Prime Minister Anwaarul Haq Kakar claimed last week that the recently created civil-military forum, Special Investment Facilitation Council (SIFC), would help bring over $60 billion in investment to Pakistan in the next five years.

This translates into average annual investment flows of $12bn. The maximum foreign direct investment (FDI) Pakistan received in any given year peaked at $5.41bn back in 2008. Last year, FDI stood at less than $1.5bn.

“It is indeed. It could probably be more than that,” Prime Minister Kakar said in an interview with Arab News when asked if reports that SIFC would bring in up to $60bn in investments in Pakistan in the next five years were realistic. What’s changed after the formation of SIFC, which would attract such huge investments? The premier said SIFC would serve as a “one window operation” to address any concerns of foreign investors.

“Two or three areas have already been addressed, like repatriation of dollars, which is the demand of any FDI entity, [that] it’s insured, it’s legally protected,” he said.

We cannot move forward from where we stand today without first tackling our longstanding structural issues

“Secondly, the bureaucratic red-tapism has also been addressed. The one-window opportunity on the platform of SIFC is primarily being designed for this purpose, that we need to cut off all these bureaucratic hurdles and rationalise the entire process of allowing and giving permission to any investment from outside within 15 days.”

Moreover, he said, a dispute resolution mechanism had been agreed under the SIFC platform. “It’s quite encouraging and favourable, which is acceptable to all the outside parties … The dispute resolution mechanism has been addressed.”

The optimistic estimates of huge foreign investment flowing into Pakistan are primarily based on hopes of materialising the promised Saudi and Emirati investment commitments of $25bn each in greenfield and brownfield projects. The government has already set up a wealth fund and transferred state-owned assets worth $6.1bn for sale to the Gulf investors. But not much progress has been made so far.

At the time of its constitution in July, the then Prime Minister Shehbaz Sharif had stated that the key goal of SIFC was to attract investment from “friendly” countries”. “The immediate task is to increase FDI to $5bn,” Mr Sharif said. He added that “collective wisdom” was needed to tackle economic challenges as he implicitly defended his decision to formally give the army a seat on the economic decision-making table.

Mr Kakar’s claims coincided with a Pakistan Investment Roadshow organised by SIFC in Dubai to attract foreign investments under G2G (government-to-government) and G2B (government-to-business) frameworks. “The event brought together a large number of global businessmen and investors representing diverse sectors,” a press release said.

“SIFC welcomed the investments from public and private sectors and assured an all-out support to realise such ventures through a collaborative ‘Whole of the Government Approach’,” the release added without disclosing the identity of the prospective investors.

Indeed, the constitution of SIFC has been received well by foreign investors and diplomats, as well as Pakistan’s business community. For example, Pakistan Business Council chief executive Ehsan Malik wrote a couple of months back that SIFC is a civil-military initiative to cut red tape and create an investment climate conducive to new investment.

“For long, the silo-working of ministries, fragmentation between the federation and provinces and U-turns in policies have combined to hurt business. So has the weak political will to take courageous actions to level the playing field with the informal sector.

“Indeed, there is a perverse consensus among political parties to retain the status quo on a narrow tax base, loss-making SOEs, circular debt and high government expenditure. IMF programmes have also been short-sighted in setting front-loaded targets that address the symptoms instead of the root causes.”

Since then, SIFC has expanded its mandate from the task of attracting foreign investment from the friendly countries initially assigned to it. One of the country’s most enterprising economy reporters, Shahbaz Rana, had reported in early October that the (caretaker) government had expanded the scope of SIFC to the “domestic economic agenda aimed at addressing the problems faced by local investors and fixing the ills of the economy”.

“The elaborate agenda of the fifth meeting of the Executive Committee of SIFC shows that its mandate is no longer restricted to the facilitation of foreign investment through swift decision-making,” he had reported for The Express Tribune.

The decision to expand the SIFC mandate was taken after the army chief’s interaction with the businesspersons in Lahore and Karachi. The report quoted an anonymous official saying that the executive committee of “SIFC has become a kind of national policies and operational issues clearinghouse where all sorts of economic and business issues are being discussed and their solutions are agreed upon.”

However, many, like renowned economist Atif Mian, believe that initiatives like SIFC are not sustainable, and it too is doomed to fail just as previous similar projects have always failed.

Likewise, a recent report by the Policy Research Institute of Market Economy (PRME) says SIFC “may fall short of its mission to attract significant foreign investment due to a lack of focus on structural issues.” Besides, it cautions, “the inclusion of the military in economic decision-making without the requisite expertise could not only destabilise the country but also lead to the failure of key initiatives.”

It rightly highlights a critical concern that the government has largely neglected vital institutional reforms and regulatory issues in its quest to attract foreign investment and address the balance of payment crisis.

“The establishment of SIFC, with its exclusive focus on attracting foreign investment, while disregarding institutional and regulatory concerns and excluding the local business community, fails to restore trust in the political government,” the report emphasises.

Additionally, the report contends that the “mandate of SIFC and its objectives are not aligned with the country’s needs” and suggests that SIFC essentially mirrors the Board of Investment (BOI).

The report raises the most pertinent question: can our reliance solely on foreign investment alleviate Pakistan’s economic challenges as the policy environment remains unfavourable? In other words, can we move forward from where we stand today without first tackling our longstanding structural issues?

Even more important is the concern regarding the shrinking space for civilians in economic policymaking as the country’s most powerful institution, represented by its chief on the SIFC apex committee, keeps expanding its role and arrogating powers in areas where it has no expertise. How will the next government deal with this anomaly? That remains to be seen.

Published in Dawn, The Business and Finance Weekly, November 13th, 2023