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One symbol of economic growth in any country is the frequent inflow of funds from the foreign investors. During the high growth period of fiscal year 2005-07 in Pakistan, there was a lot of foreign investment made in different sectors i-e telecom, banking etc. What benefits or relaxations were given to the foreign investors to promote foreign direct investment at that time? Write your answer very briefly in 5 points. Each point contains 2 marks.

1) Private sector is allowed in all strategic sectors such as oil, gas, telecommunication and other services sector on a competitive basis which are supported by sound sector policies.Service providers in telecom are emerging as large giants and have enhanced country’s wireless penetration to reach 29% in November 2006 with the total cellular subscribers at 46 million. Moreover, the intense competition has also reduced call costs,increased outreach and offered increased services to the customers. .All manufacturing sector, 80% of the banking assets and strategic stakes of utility companies have been sold off to private sector. With scaling back of government’s role, the share of private sector in investment has risen steadily from merely 7.8% of GDP in 1980’s to over 13% of GDP in FY 2006.

2) Banking sector reforms are far reaching. Aside from their impact on depth and efficiency of financial intermediation, the profitability of banks has allowed them to earn high returns, The private credit growth in last few years has been significant reaching over 30% in FY06. Private credit grew from insignificant levels to over Rs. 400 billion in FY06. The credit expansion fuelled economic activity, while reviving and enhancing industrial and other capacities.

3) Economic activity has and will be further Pakistan has cumulatively attracted $8 billion foreign investment flows - 26.5% was sale proceeds of public assets and 49.2% from FDI, These foreign inflows have come into banking, Telecom and oil and gas sectors primarily.Prospects are that Pakistan will attract about US$6.0 billion in FY07 – an all time high annual flow foreign investment is expected to be more diversified,comfort to foreign investors that they are treated at par with domestic investors (and in some respects even better).

4)Reforms, both of incentive and administrative regime, have helped Pakistan to improve its ranking in the Survey conducted by the World Bank on ‘Doing Business in 2007.’ Pakistan now ranks 51 in the time to import (which has reduced from 39 days to 19 days) as trade logistics and customs procedures were streamlined and scores well on the indicators related to starting a business (54th out of 175) and protecting investors (19th out of 175).