Tuesday, September 26th, 2017
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Overseas Investors Chamber of Commerce and Industry (OICCI), representing approximately 200 multinationals from 35 countries, in an informal meeting with the media stated that foreign investors continue to have doubts about the sustainability of energy and security in Pakistan. And they prefer India to Pakistan as their destination. The recent spike in load shedding to levels that are somehow comparable to the tenure of the PPP-led coalition government have raised serious concerns in the general public about the efficacy and efficiency of the Sharif administration's handling of the energy sector. This spike belied repeated and sustained government claims that improvements in generation and the associated transmission network would massively reduce the hours if not entirely end load shedding in the country by the 2018 elections. It is quite disturbing that claims that untenable levels of load shedding in April would end by the first week of May (attributed to unseasonably warm April and the snow melt not expected till end April by the Minister of Water and Power on the floor of House echoed by the Secretary in a parliamentary standing committee) have yet to be realized.

The Water and Power Ministry's claim that there has been a marked improvement in the performance of the energy sector in terms of improved generation and reduced line losses is undermined by international donor agencies analysis of the sector, including International Monetary Fund's (IMF) assessment subsequent to the Article IV Consultations uploaded on 5th April 2017 where it stated that "bringing the power distribution sector to full cost recovery will be critical to ensure long-term success of new energy initiatives and minimise fiscal costs". The World Bank's assessment is more damning: "Circular debt cleared earlier has piled up again nearly to its 2013 levels. There have been efforts to reduce the electricity regulator's independence."

But what was not highlighted by the OICCI representatives, and which must be a source of serious concern for the Dar-led Finance Ministry, was the observation made in an IMF report dated 2nd May 2017 in which the Fund observed that "debt servicing costs (which are particularly high in Egypt, Lebanon, and Pakistan) are likely to increase in line with anticipated higher global interest rates. High debt levels also deter investors and add to financial stability risks... Higher debt servicing costs will put further pressure on fiscal positions, reducing the scope for public spending-like on infrastructure and education-to support growth".

There is no doubt that the two military operations - Zarb-e-Azb and Raddul Fasaad have considerably improved the security situation in the country - both in tribal areas as well as the settled areas including Karachi; yet the fact remains that the country continues to be subjected to periodic horrendous terror attacks, many planned in foreign countries and launched in Pakistan, and our 'do more' mantra to our neighbours continue to fall on deaf ears while their accusations against our alleged support for terrorists that launch attacks on their soil continue unabated.

Finally, it is relevant to note that comparisons between India and Pakistan in the economic arena have by now become irrelevant as India has overtaken Pakistan in almost all economic indicators. It has enviable foreign exchange reserves that, unlike in Pakistan, are not premised on debt and at the same time has a growth rate that rivals China's. Its tax structure focuses not on generating ever-larger amount of revenue to meet its rising current expenditure, as in our case, but on incentivizing their productive sectors, which explains why the Indian yield per hectare is higher than ours and why Indian exports continue to rise. Last but not least, the Indian rupee is more in tune with its market value while ours is overvalued by 15 to 20 percent as per the IMF which implies Indian exporters are not operating at a disadvantage in the global market.

Much needs to be done in the economic arena and one would hope that there is a major shift in policy from what the country has been subjected to during the past four years; however, this appears highly unlikely as our Finance Minister spends an inordinate amount of time, expressing confidence in his policies.

the author