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Diaspora investment: A sleeping giant that needs to be awakened

LAHORE: Pakistan is wasting workers’ remittances worth $20 billion mostly in consumption, while Indians and Chinese have managed to convert a major chunk of the remittances sent home by their respective diaspora into productive investments.
Countries attract investment on the basis meaningful reforms. The first to invest are always the local businessmen followed by the expats of that country. Homeland fascinates expats, who usually leave their countries to find work abroad. When they succeed in foreign land they yearn to go back and invest their savings for which they need a favourable environment. The countries that provide this environment are flooded with investment and innovative ideas from their countrymen. The foreign investors never make forays in a country that is inhospitable to the investments of its own diaspora.
It is indeed tragic that most of the Pakistani expatriate investors regret their decisions after policy u-turns, frauds, and corruption start gnawing away at their investment. They hesitate even to invest in property fearing land mafia. It only sends a negative message to the countries of their work, disillusioning the foreign investors. The reforms instituted to attract investment are weak and prone to changes at the whims of rulers.
The main difference in the so-called more liberal Pakistani reforms and the reforms enacted by the Indians is that in most of the reforms in Pakistan some discretion is vested in the hands of the ruling elite turning the opportunity in to rent seeking culture. There is also frequent tinkering of rules by both democratic and authoritarian Pakistani governments. The reforms in India provide level playing field to all and no special SROs are notified to favor a company or individual.
Economists point out that reforms in India have delivered, aided by its diaspora, while more liberal Pakistani economy has remained in limbo because of frequent fiddling with the rules continues to keep potential overseas Pakistani investors at bay. The litmus test for checking the confidence on reforms is to see how the large Pakistani diaspora, having huge foreign savings, reacts to the country’s policies.
The lack of attraction in our reforms can be judged by the fact that new investments in industry are very rare in Pakistan. Almost all big businessmen have shifted their attention to services sector and are also investing outside the country, including our politicians. The children of bureaucrats or former government servants own big properties abroad. Still our policymakers boast that country has the best investment policy in the region.
Pakistan has a large number of successful entrepreneurs operating in European Union, United States, and Canada. They have, since long, been waiting for an opportune time to go back and invest in their homeland. Interaction with many expatriates reveals that existing economic policies, believed to have belittled the country the world over, make no sense to them.
Indian diaspora cheered the reforms introduced by former Indian prime minister Manmohan Singh, when he was was a finance minister during the Narasimha Rao regime. Those historic reforms instilled confidence in the Indian diaspora. Currently, a large percentage of foreign investment in India comes from Mauritius, which houses a huge number of Indian immigrants. Foreign investment pouring into India from Europe and United States also mainly comes from Indians living in these regions.
Pakistan is among the top ten recipients of workers’ remittances, which indicate the strength of its diaspora. They are reluctant to establish industrial projects from their huge savings as they have no trust in the system.
The situation on investment policies on the China-Pakistan Economic Corridor (CPEC) route is still murky but the Pakistani Diaspora is hoping that this time around they would be given a fair deal.
Japanese managed their transformation through major initiatives throughout the Meiji era. It was accomplished by sending gifted Japanese abroad to bring back ideas to be adapted into Japan’s culture and needs. In our case, the gifted diaspora is already there and could serve that function if we genuinely and sincerely engage them.
Source: The News