FOREIGN investors are dismayed for a number of factors — law and order, crumbling utilities, inconsistent official policies and the rising cost of doing business — but a majority of them still look at Pakistan as “a lucrative place worth doing business”.

A perception survey by the Overseas Investors Chambers of Commerce and Industry (OICCI) 2008 indicates that 18 foreign companies may wind up their businesses for security reasons. About 65 firms plan to limit their expansion activities. Some 96 per cent of the 110 firms, which responded to the OICCI questionnaire, perceive law and order situation worsening as compared to 83 per cent in 2007.

Foreign companies are worried about the energy situation and the flaws in the execution of official policies, high corporate tax at 35 per cent etc.

Quite a good number of the 18 foreign firms thinking of winding up business here are said to be from pharmaceutical sector. Their main complaint is that they are not being allowed to increase the price of their products. The well known British Pharma is planning to sell its factory of anti-biotic in Karachi. Negotiations for its sale were held with a UAE-based company. Recently, a few pharma firms have already wound up their businesses.

Nonetheless, an overwhelming majority - 76 per cent - of the foreign investors are inclined to go ahead with their investment and business expansion plans for the next two years. “The general tone of responses from the investors’ community to the OICCI perception survey is positive’’ the OICCI chief Waqar Malik remarked while launching the survey report on Wednesday. He said that a majority of the 110 responding companies out of the 175 member-firms did not constrict investment inflow in recent times nor do they plan to do so in future.

“We are moving ahead with two power projects with a total outlay of $600 million ‘’, Javed Mehmood, the Chief Executive of Hubco, informed Dawn on telephone. He heads the Energy Committee of the OICCI.

Hubco has its own share of problems as till November 14, the government owed it Rs46.5 billion on account of electric power sale to Wapda. “The government gives two per cent above discount rate on the outstanding amount but bank charges us one to two per cent more on the loan we borrow’’ the Hubco Chief Executive complained.

Hubco is one of the entities hit by a circular debt of over Rs150 billion shared by Wapda, gas and oil companies and refineries and, of course, the government. Hubco gets fuel from the Pakistan State Oils (PSO) and during the last over two years it had remained frequently under notice for non-payment.

“It is embarrassing to explain, every now and then, to our principals the reasons for cash flow problems’’, Javed remarked. Even in the face of this situation, he said, the company was on track of 250 megawatt Narowal power project that should be commissioned by March 2010. The second 84 megawatt hydro project at Mangla is expected to be on line by 2012.

With a shortfall of 4,500 megawatt and an indicated 10 per cent increase in electric power demand every year, “Pakistan offers best prospect for investment - foreign and domestic- the Hubco Chief Executive said. He said his company was also looking at investment prospects in coal-fired projects. Hubco runs 6,000 megawatt lignite- fired power project in Australia and is thinking to put its experience in Pakistan.

“Conditions are certainly not enviable’’ answered Qazi Sajid, Chief Executive of a multinational, when asked how he looked at the business prospects in light of the OICCI perception survey. He agrees with most of the findings of the OICCI survey but is optimistic on possibilities of improvement in the situation “once the government signs an agreement with the IMF.’’ He recalled that conditions were worse after 1998 nuclear explosion when Pakistan was under severe sanctions.

He is confident of better days ahead, in not too distant future but very soon. Business - domestic and foreign - will be back on normal growth track. He disclosed that quite a few multinationals in India and Pakistan were exploring co-operation in trade diversification, geographically and productwise. “Foreign investors will also play a key role in future business growth in South Asia’’ he said.

Majyd Aziz, a former president of the Karachi Chamber of Commerce and Industry, disclosed that representatives of a few Japanese companies explored investment prospects in Pakistan in July-August. “These people may come again sometimes early next year with some programmes,’’ he said. Majyd is the Vice-President of the Pakistan-Japan Business Council and is involved in a joint exercise of working out a strategy for joint ventures.

A proposal to treat Indian investors’ investors at par with others has been given to the government recently by a panel of economists headed by Dr Hafiz Pasha. It has attracted attention of local businessmen. China has already shown keen interest in setting up exclusive Chinese business zone.

Geo-political location, cheap labour, availability of many industrial raw materials and a host of other factors make Pakistan an attractive choice for foreign investors. But the OICCI wants that the domestic business be given opportunities to grow because local investment will tempt others to come. The government should address issues that are proving impediments in attracting investment.