From 1953 to 1970 Pakistan was the darling of multinationals. In 1953, a confidential memo was issued by two most powerful men in the USA - John Foster Dulles, secretary of state and Allen Dulles, chief of the newly formed CIA. In this memo they identified that US investment may primarily be directed to three locations in Asia - Turkey, Pakistan and South Korea. These three countries formed the TRIAD against Communism. After the issuance of this memo, Pakistan benefited hugely. MNCs poured in from USA. Also Europe and the UK. The Japanese MNCs were in their formative stages. By 1965, most of the big names were here - in banking, pharma, oil and energy, FMCG, chemicals, etc. The Karachi social scene was driven by expatriates - golf, swimming, beaches, night long parties etc. The two great clubs of Karachi were managed by the expatriates, with a little native input.

The halcyon days came to an end in 1971, when ZAB and the People's Party came to power. The western multinationals immediately put their investment plans for Pakistan on 'Hold'. Pakistan was put on the watch list. Some MNCs seriously considered exit. Bhutto's execution was celebrated in the boardrooms of MNCs. Even the domestic businessmen rejoiced.

Fast forward to the current decade. The world is recovering from the financial crisis of 2008. The US is leading the recovery. That Dow Jones is touching 18,000 is a good sign. The MNCs of the world are feeling confident again. The tech giants like Google, Facebook, Apple are making titanic investments in R and D and marketing. The US corporations have accumulated huge cash reserves - Apple alone has US $400 Billion. The Japanese corporations are on an international investment spree.

Alas, Pakistan is not on the radar. In the last few years we have seen the exit of big corporates - like ICI, Caltex, HSBC, Barclays, Siemens, etc. When MNCs such as these exit Pakistan, questions are asked. Why? What went wrong? The board of investment - (BOI) is totally oblivious to the fact that big name MNCs have a lot of investment choices. Eastern Europe offers good potential, market access, work force etc. once these countries have become part of EU (as some have), huge benefits will accrue to the investor. For Pakistan the main challenge is India, Iran and Dubai. India is the fastest growing large economy in the world. Its growth rate is extrapolated at 7% for the next 5 years. Even with its problems of bureaucratic inefficiency, India is attractive for FDI. The world's MNCs are watching Iran. As the sanctions are removed, international investment will appear. The recent Airbus and Boeing deal was a pacesetter. MNCs are watching Iran very closely - the oil and gas reserves are third largest in the world, and will translate into a business boom eventually.

In Pakistan, there has been no significant FDI for many years - except Chinese, and some Arab money. The Chinese investment should be encouraged. The contemporary numbers are good even if slightly uncertain. Last year the FDI in China was over US $100 billion. Petrochina and China Mobile are in the top 10 MNCs. In the financial sector, ICBC is the biggest bank in the world, with loans outstanding of US $1.1 trillion. China has 3000 listed companies. The official reserves are close to US $3.5 trillion. However we must take note of the following negatives linked to Chinese investment: China has no law like the foreign practices corruption act, except for a few Chinese companies most of the technology is in the median range. China has very little soft power (No Chinese brands are dominant, worldwide), in management practices; Chinese rarely employ locals at policy making level. Pakistan needs to attract at least US $10 billion FDI per year. To achieve this, BoI needs to accelerate and the provincial BoIs need to be nimble.

(The writer is the former Executive Director of the Management Association of Pakistan)

Copyright Business Recorder, 2016