1	Board of Investment Government of Pakistan A Strategy for Boosting Domestic and Foreign Investment Presentation to The Chief Executive by Chairman, BOI 16^thOctober 2000
2	Presentation Structure 1. Top-level priority and support 2. Evolution and present structure of BOI 3. Impediments to domestic and foreign investment 4. The strengths 5. Major steps to restore confidence 6. Capacity building at the BOI 7. Future BOI directions: vision, missions 8. Investment targets 9. Decisions Required
3	Top Level Priority & Support: Clear and Unequivocal “ ...the restoration of investor confidence is a priority of the new administration” 15 December 1999 Address of the Chief Executive
4	Evolution of the BOI
5	Present Structure of BOI
6	Impediments to Domestic & Foreign Investment Freezing of foreign currency accounts Outstanding IPP/Hubco litigation Over-regulation: too many regulatory agencies too many SROs and too much bureaucracy Inconsistency in policy implementation Negative international image of Pakistan perception of Pakistan as high-risk low credit ratings
7	Impediments to Domestic & Foreign Investment ..contd. Domestic fixed capital formation stagnant except textiles, IT and Oil & Gas Low confidence among domestic investors Pakistani investors moving overseas Investor shyness among overseas Pakistanis
8	Regional Investment Scoreboard Growth of Gross Domestic Investment 1990-99
9	Global/Regional Investment Scoreboard Foreign Investment Inflows - 1999
10	Pakistan Investment Scoreboard FDI+FPI (1990-2000)
11	Pakistan Investment Scoreboard (1990 – 2000)
12	Pakistan Investment Scoreboard Main Foreign Investors (1990 – 2000)
13	Foreign Investment Shares by Sector
14	Foreign Direct Investment by Sector
15	Current FDI Flows
16	The Strengths: Consistent Investment Policy Trends Liberalization De-regulation Privatization Consistent policy direction, but problem has been and is, of inconsistent implementation
17	Present Investment Policy
18	Pakistan’s Investment Policy - Regional Perspective
19	The Strengths: Some Key Promotion Factors Commitment to market-led economy, pursuing open trade and investment policies Three-year trade policy horizon providing security to the business community 650 foreign-affiliated companies operating in Pakistan Strong and effective BOI coordinating with the Federal & provincial authorities, and overseas missions to proactively market Pakistan as a competitive place to do business
20	Major Steps to Restore Confidence New sectoral and export promotion policies Promoting investments in SMEs Ambitious privatization program Restructuring the Central Board of Revenue Reforming the tariff and tax systems Dismantling the SRO culture
21	Improving Investment Climate Improving existing investment policies Revamping the BOI: introduction of corporate culture building institutional capacity (ADB) Addressing the following major constraints to investment: ineffective policy implementation local and international political issues Improvement in quality of life
22	Proposals for Improving Existing Investment Policy - 1 (Proposals under consideration) Further liberalize FDI in the service sector reduce minimum foreign equity from US$ 0.5 m. to US$ 0.25 million Allow royalty, technical and franchise fee payments to investment in social, service, infrastructure, and agricultural sectors
23	Proposals for Improving Existing Investment Policy - 2 (Proposals under consideration) Reduction in up-front cost of investment Production rather than investments be taxed. Therefore, import duty on capital goods (plant machinery & equipment) which are not manufactured locally should be zero rated and raw materials for such capital goods for local manufacturing /fabrication should also be zero rated
24	Proposals for Improving Existing Investment Policy - 3 (Proposals under consideration) Enhancement in FYA from 50% to 75% of PME for infrastructure and agriculture projects Immunity from asking source of investment by tax Authorities
25	Proposals for Improving Existing Investment Policy - 4 (Proposals under consideration) Enhancement in the limit of local borrowing by foreign controlled firms for working capital up to 100% of paid-up capital plus reserves for non-manufacturing sectors Selected measures to facilitate investors Increase duty free limits for food items from US$ 1,000 per person per year to US$ 2,000 Reduce equity requirements for airport entry passes for protocol purposes from US$ 10 m. to US$ 5 m.
26	Capacity Building at the BOI: Key Goal Develop an Organizational plan that places the BOI: as a dynamic investment promotion agency to meet the challenges of the 21st century at the forefront of public sector management in Pakistan leading facilitator in the region
27	BOI Institutional Strengthening Investment Promotion Diamond
28	Key Features of BOI’s Capacity-Building Project Road Map: study of laws, rules, procedures that investors have to comply Database and interactive website: for investors, government departments, embassies, with hot links into other investor-relevant web sites Effective Partnerships: with provinces, ministries, private sector and trade bodies Investor Targeting Strategy: investment promotion and image building activities Develop a Service-oriented organization culture
29	The Vision Promoting domestic and foreign investment to enhance Pakistan’s international competitiveness and contribute to economic and social development
30	The Mission To implement Policy Simplify procedures to attract investment To promote investment for profits Promotion (proactive, cost effective and responsive) Facilitation (account executives to provide customized assistance to investors) To coordinate for success Build linkages amongst provinces, private & public investors and overseas missions
31	Potential Obstacles to BOI Change Lack of commitment to change from all levels of the bureaucracy Inappropriate organization structure, system and work procedures Inadequate information system Limited budgets
32	Success Factors for BOI Change Policies and leadership Responsiveness of government regulators Simplified organization and structure Partnership development Communications and working systems Human resource development Information system and database FDI targets
33	Non-availability of Authentic Data on Investment Sources: Statistics Division State Bank of Pakistan DFIs & Commercial Banks Central Board of Revenue Provincial Governments Line Ministries & Agencies Securities & Exchange Commission of Pak Need for a single coordinating agency
34	3-6 Years FDI Targets
35	Image Building Campaign In local and foreign markets: Coordinating with the provinces to promote investment opportunities Awareness of business environment through press and TV Developing promotional materials: Investing in Pakistan - guideline package investl Pakistan quarterly bulletin press releases and feature articles CD-ROM, video Cassette etc.
36	Image Building Campaign-2 Domestic investor conferences in all provinces Roundtable Meets in target countries Invite foreign political and financial media to Pakistan on regular basis Disseminate information to the foreign media correspondents in the region and in the target countries
37	Promotion Plan Oct – Jun’01
38	Decisions required 1. Passing of BOI Ordinance 2. Reconstituting the BOI Board inducting private sector representatives, from within Pakistan and abroad regular quarterly meetings of the Board of BOI
39	Decisions required 3. Provinces to : own, implement & take care of investments revive Provincial Committees on Investment & quarterly meetings with BOI identify minimum of two industrial locations (with vacant plots) having all the utilities re-allocate and divert funds to plug the gaps in infrastructure / utilities in existing industrial estates monitor the projects commencing business, expansion, BMR or closing/ sick units
40	AGENCIES INVOLVED IN INVESTMENT PROJECTS
41	Decisions required 4. Concept of one window requires concerned Federal Ministries/ Agencies and Provincial Departments to own the investment, support BOI and help the investors.
42	Decision required 5. Formation of Investment Service Group (ISG) 6. Contracting Image Building Consultants 7. Approving promotion plan 8. Face-lifting of office building : developing an investor-service center improving the conference hall and library upgrading the Karachi office Amount required: Rs. 10.0 m Budget provision: Rs. 0.5 m Budget required: Rs. 9.5 m
43	Board of Investment striving for Investor Friendly Pakistan in 21^st Century